Do you hallucinate when you wake up?

[MoonBeam33]

Originally Posted by Theropod

I noticed that they occur when I'm severely depressed.

Stress, insomnia, and depression can all bring them on.

[Dd714]

I use to do that in my more free-spirited days - roll over from bed and grab the bong for a few tokes...your mind kind of floats. We used to call that "wake and bake".

Seriously, you are simply waking up from REM sleep.

[Vasily]

By the way, here's what DSM-5 says about these hallucinations: "...those that occur while falling asleep (hypnagogic) or waking up (hypnopompic) are considered to be within the range of normal experience..." (pp. 87-88)

They're thus not considered a sign there's something "wrong" with you. In the following study, 37% of about 5000 people in the UK reported hypnagogic hallucinations, and 12.5% reported hypnopompic hallucinations. So the experience seems to be pretty common.

Hypnagogic and hypnopompic hallucinations: pathological phenomena? - PubMed - NCBI