For the past few years, the run-up in home prices has been the hot topic at neighborhood gatherings. Now the discussion is dominated by another question: When will the ride end -- especially with Hurricanes Katrina and Rita casting a shadow on the economy? Rather than wait for price appreciation to slow, many homeowners have decided to cash in their profits and move on.

For Joan and Mike Whitney of Snohomish, Wash., outside Seattle, moving wasn't in the cards until about a year ago, when talk of a housing bubble in the area began to make Mike nervous. "A bubble seems obvious when you read that speculators are buying one in four properties, and people are paying off their credit-card debt with home-equity loans," he says.

Mike, 53, a self-employed landscaper, didn't want to lose the opportunity to cash in on the price appreciation in his area -- 38% over the past two years. So he and Joan, 49, discussed selling their old frame farmhouse on five acres of land, which they had bought for $63,000 24 years before. Eventually, the Whitneys decided to list the property, but Joan got cold feet and took it off the market. "I raised my kids in that house," says Joan. After a few weeks, however, she overcame her qualms. "The bubble thing was the straw that broke the camel's back," she says.

The Whitneys relisted their property this past summer, and after only a week they accepted an offer for $285,000, just $4,000 less than their asking price. Joan and Mike moved down the road, where they rent a significantly larger house on a ten-acre horse farm for $1,200 a month. That's $800 more than they were paying as property owners in taxes and insurance (their mortgage was paid off). But they're basking in their new freedom from the responsibilities of homeownership. "If the plumbing needs work or the back 40 needs mowing, I just call the landlord," says Mike. For Joan, "it's a huge feeling of relief, like a burden has been lifted off my shoulders."

Now they have time to relax in their new digs, enjoy the view of grazing horses against a backdrop of mountains, and plan what to do with the $285,000. For the time being, it's in the bank until they decide where to invest it. But if housing prices really do peak and start to head down, the couple might become homeowners again.

Weighing the options

Despite the talk of a bubble bursting, it's more likely that home prices will continue to head up, but at a slower pace. Economic fundamentals -- strong demand and a tight supply of housing -- continue to push prices higher. In fact, some areas that have experienced relatively slow appreciation, such as Kansas and Utah, are beginning to pick up steam, says Patrick Lawler, chief economist for the Office of Federal Housing Enterprise Oversight. Mortgage interest rates, which are still close to their 40-year lows, are contributing to the momentum.

That said, it could still be a good time to ponder a move, especially if you live in the Northeast, upper Midwest or along the West Coast -- the areas most vulnerable to a pop, or at least a fizzle. On average, home values appreciated nearly 15% nationwide from July 2004 to July 2005, and that can't last forever. Neither can the annual gains of up to 30% in some of the more torrid coastal markets, says Tom Kunz, president and chief executive officer of Century 21. Kunz believes gains of 5% to 8% a year are more realistic. David Lereah, chief economist for the National Association of Realtors, expects price increases for 2005 to average 11% for existing homes and 4% for new ones.

Of course, economic wild cards could change the forecasts. For example, Lereah expects that demand for housing and rebuilding in the Gulf Coast region will put upward pressure on overall home prices.

Some areas are already showing signs of reaching a market top. In Phoenix, Rich Rector, chairman of Realty Executives, says he has noticed that signs advertising open houses are starting to reappear. Until recently, holding an open house wasn't necessary to attract multiple offers. In the Northern Virginia suburbs of Washington, D.C., "price reduced" signs have begun sprouting in front of high-end homes, traditionally the first market segment to soften. Industry observers there say that the market has begun to level a bit but point out that the vast majority of homes are still selling within 30 days. The average time on the market was 21 days in August 2005 versus 18 in August 2004.

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