The real estate bug bit Karen Brodie a few years ago. She left her desk job as an accountant with Fidelity Investments in 2001 and teamed up with a cousin to buy a single-family house in the Boston suburb of Dorchester for $98,000. After spending $50,000 to upgrade the house, the pair sold it a year later for $278,000. Now Brodie and her cousin have expanded their operation to include two pricier three-unit buildings in Dorchester and two three-family units in Rhode Island. With the Dorchester properties now up for sale, the pair could turn a profit of between $500,000 and $800,000 in little more than a year.

Across the country, thousands of people like Karen Brodie are chucking their day jobs to become real estate investors. And why not? The nation is experiencing a boom in property values that has seen the median price of an existing home rise 10% in the past year; 37 areas saw prices jump by at least 15%. Thanks to leverage, which lets you buy a property for a fraction of its cost, you can double your money in a flash.

But soaring prices and the emergence of a generation of wet-behind-the-ears real estate investors stoke fears that the boom is turning into a bubble that will burst. At worst, argues Brodie, 40, home prices in her region could experience "a short correction." But, she acknowledges, "a bubble is something I think about."

Because of the localized nature of real estate, it's hard to argue that there is a national real estate bubble. But a recent report by mortgage giant Fannie Mae says conditions in many markets "mirror past conditions that preceded regional housing busts." And Federal Reserve chairman Alan Greenspan says he is detecting "little bubbles" in certain parts of the U.S. For example, from the first quarter of 2004 to the first quarter of 2005, median home prices soared 46% in Bradenton, Fla., and 33% in the Riverside-San Bernardino area, east of Los Angeles.

Another reason for concern: the growing number of houses bought as investments. Nearly one-fourth of purchases over the past year were investments, and "they're concentrated in a few markets," says Marco Van Akkeren, an economist for the PMI Group, a residential mortgage insurer. He notes, for instance, that 44% of home purchases in Las Vegas over the past year were investments. Markets with a high proportion of investor-owners tend to be risky because investors often have little or no equity in their properties, and they're quick to sell at any hint of a downturn in property values.

So how do you know if your housing market is built on thin ice? There's more to it than simply identifying the areas with the strongest gains in home prices. Job growth, population, median income and affordability all play roles in determining which markets are vulnerable to price declines.

Working with PMI's Housing Risk Study, we pinpointed the 13 most treacherous housing markets. We describe them below.

In PMI's view, Boston is the riskiest housing market in the nation. PMI assigns a 53% probability that Boston housing prices will decline over the next two years. The city is at risk despite falling home prices between 1992 and 2001 and a relatively modest annualized appreciation of 7% since then. The problem, says Lawrence Yun, regional economist for the National Association of Realtors (NAR), is that the Boston area has lost 200,000 jobs since 2000 and that housing prices remain high, with a median home selling for $398,000. But David Lindahl, a veteran real estate buyer who runs a local investors' club, looks at the bright side of a possible price decline in Boston. That would mean, he says, "buying opportunities in the foreclosure market."

Like Boston, New York City suffered through a housing slump in the '90s. But while job losses were the big problem then, now it's out-migration. "People from New York, especially baby-boomers, are moving out," says Yun. If the trend accelerates, it could cause a problem, particularly for the high end of the real estate market. Meanwhile, prices remain extremely high. The median price for existing homes in the metropolitan New York City area (which includes parts of Connecticut and New Jersey as well as Long Island and Westchester County) stood at $435,000 at the end of the first quarter of 2005, up 18% over the first quarter of 2004. PMI puts the risk of a price decline in New York City at 31% and says it's even money that prices on Long Island, where affordability is becoming a concern, will sink within two years.

Prices of existing homes in Fort Lauderdale rose 32% over the past year, putting the median price at $321,000. PMI puts the risk of prices falling at a relatively tame 23%, but signs of aggressive buying by investors warrant Fort Lauderdale's inclusion on our list of the riskiest areas. "Fort Lauderdale is very vulnerable," says Kenneth Simonson, chief economist for the Associated General Contractors of America, a builders trade association. "There are lots of reports of speculative buying." NAR economist Yun suggests that there's been so much appreciation that retirees, the traditional buyers of Fort Lauderdale real estate, may be priced out of the market. Europeans remain a source of demand, but that could quickly vanish if the euro continues to weaken, as it has recently.

It's not the amazing performance of the Washington Nationals (formerly the Montreal Expos) that is driving up home prices in and around the nation's capital. It's increases in federal spending, which support a strong job market. The median home price in Washington, D.C., and the nearby Maryland and Virginia suburbs jumped 23% over the past year, to $369,000. Even a modest decline in government outlays could tip the housing market on its side. PMI rates Washington's chances of a slump in housing prices at 19%.

What's Detroit, of all places, doing on a list of the riskiest housing markets? After all, home values rose less than 1% over the past year, to a median value of $151,000. Yet PMI estimates the odds of a price downturn at 38%. It's all about jobs -- at the struggling automakers in particular. General Motors hammered home the point in early June with the announcement that it would eliminate 25,000 jobs by 2007. "With job growth in Detroit flat to negative, and with GM and Ford struggling, prospects for housing look weak," says Simonson. Still, even in a tough real estate town such as Detroit, some investors see opportunity. Sonny Gandee, 25, a self-proclaimed "day trader in real estate," says he's confident that the Hispanic population will continue to grow, so he is focusing on Detroit's Mexicantown neighborhood. Gandee netted $250,000 over three years by investing in properties there, renting them out with minimal rehab, then selling.

Real estate investing is serious stuff in Los Angeles. Two years ago, Marsha Haywood left her $2,000-a-month job running a drug- and alcohol-rehabilitation home for women in order to get into property. Since then, she's acquired four houses before construction. Haywood sells on completion and expects a profit of roughly $35,000 to $100,000 per unit. "You need to play it like a game," says Haywood, 57. Speculation of this sort, plus explosive price increases -- 32% last year and 16% in 2003 -- have some wondering whether prices in L.A. represent one of those bubbles that Fed chairman Greenspan has in mind. Another risk: Local authorities could loosen permit restrictions, opening the door to a substantial amount of new supply. PMI rates L.A.'s risk of a property slump at 40%.

These seven areas are also vulnerable to falling housing prices. They are listed in order of risk, with the riskiest first.

How do you make New York look cheap? Easy. Try buying in the City by the Bay. After increases of 13%, 21% and 30% in the past three years, the median home price in San Francisco is $689,000 -- the highest in the nation. The high price of land and tough restrictions on what may be built on that land are major factors. PMI sees a 40% chance of falling property values over the next two years.

Affordability is a key issue in the hottest market in northern California, where prices have climbed 27% in the past year and an annualized 19% over the past five. A state-budget crisis puts jobs at risk in the Golden State's capital. Odds of a price decline: 40%.

The New England city that was founded as a home for religious dissenters faces some of the same issues as Boston: no population growth and stagnant job growth. Over the past three years, home prices in Providence have risen at a rate similar to Boston's. PMI puts Providence's housing-price risk at 39%.

Housing prices in the Twin Cities have climbed an annualized 9% over the past three years. Still, PMI places the odds of a downturn at one in four. With Northwest Airlines, a major area employer, facing problems, job growth and payrolls are stagnating.

Housing prices in the Mile High City have risen modestly the past four years, including a gain of just 2% over the past year. Job growth has also been moderate. But a concentration of employers in the troubled telecom sector leads to a risk of a home-price downturn, which PMI puts at 21%.

A surge of buying by retirees, Europeans and South Americans is boosting prices in Miami. Prices skyrocketed 28% over the past year, to $316,000 for the median home. But there's less risk in Miami (PMI rates the chance of a price decline at 18%) than in Fort Lauderdale, just 40 miles to the north, because tourism, services, trade and transportation remain strong.

The adjoining cities on Florida's Gulf Coast have been popular landfalls for hurricanes of late, but the area is also a popular destination for retirees. Prices haven't risen as high as in Miami or Fort Lauderdale, but the median home price jumped 16% over the past year and an annualized 12% over five years, to $173,000. PMI places the risk of a housing slump at 14%.

I did the same thing with my ST Pete/Clearwater home two months ago. I was up 72% in 16 months! I decided to take the money are run. I moved back to the Dallas Texas suburbs where I moved to Florida from. Bought a beautiful home in an upscale neighborhood for less than half the price of Florida. DFW has not experienced a bubble as many other locations in the country.

I've lived in Ft Lauderdale for 49 years, have been a homeowner for 33 years, and am in the real estate finance business (albeit commercial, not residential). I have to disagree with the bubble theory here. Reasons: Lack of developable real estate; relatively low real estate taxes; fairly well balanced economic base; dramatic increase in values are more of a reflection of historically low values, compared to what they should have been; demand still out-strips supply for single family units; lack of speculation in single family units (as compared to condominiums). I believe that the rate of increase in values will slow, but that there will not be a wholesale drop in values, especially in the areas east of I-95 in Ft Lauderdale.

One caveat....I would not buy a luxury condominium in Ft Lauderdale right now. Speculation in that market has been very active, and construction lenders are beginning to crack down on contract flipping, strawman buyers, etc. Developers are going to have to come in with legitimate, non-assignable contracts from end users to get their construction financing done.

Q. How is my 10 year old son ever going to afford his first house/town house/condo (in approx. 10 yrs)?

A. He's not ever going to.

I fear our greed is going to push the next generation into socialism.

Here's hoping the bubble pops soon, and often.

It's not the amazing performance of the Washington Nationals (formerly the Montreal Expos) that is driving up home prices in and around the nation's capital. It's increases in federal spending, which support a strong job market. The median home price in Washington, D.C., and the nearby Maryland and Virginia suburbs jumped 23% over the past year, to $369,000. Even a modest decline in government outlays could tip the housing market on its side.

In that case, the proximate causes of property-value loss will be esthetic blight (from the feces and urine dropped onto the houses by the pigs flying overhead), the need to redo the ductwork (to tailor the air conditioning and heating to fit a sun that rises in the west and sets in the east), and a glut of new real estate coming onto the market (after local Catholic churches close up shop in response to His Holiness' conversion to Paganism).

It may, however, be somewhat offset by housing demand from imps and demons in search of new abodes (after fleeing from the ice and snow blanketing their old digs).

Like Boston, New York City suffered through a housing slump in the '90s.

What, prices rose by only 5-10% a year instead of 25%?

But while job losses were the big problem then, now it's out-migration. "People from New York, especially baby-boomers, are moving out," says Yun.

Utter crap. People from around the world are still flocking to NY, and they will easily replace the old-timers who are leaving. As always.

If the trend accelerates, it could cause a problem, particularly for the high end of the real estate market.

ONLY for the high-end of the market. Affordable starter or middle-class homes in Westchester, NJ, LI, etc. are practically nonexistent, and there are HUGE amounts of city-dwelling yuppies, recent transplants, and upwardly-mobile ethnic families from Queens, Brooklyn and The Bronx who want their picket fence and lawn, and are all searching for a way to get in.

There is no way the low-end or middle-class market crashes in the NYC area.

Now, the people who ask $1.5 million for their little 3-bedroom split-level in middle-class suburbs... there's your rude awakening coming.

Judging by the ads in the on-plane magazines, the Miami condo market is nuts, they must have five or six new mega-condos being built right now. It's been a few years since I've been back to SoFla, but I suspect I wouldn't even recognize the Miami skyline now.

How is my 10 year old son ever going to afford his first house/town house/condo (in approx. 10 yrs)?

I live in the Philly suburbs and own several properties in the area. The market value of all of them have more than doubled in the last ten years, some have tripled and quadrupled. That sounds obscene and really it is. But as a landlord, I have not quadrupled the rent. I wouldn't have tennants if I did. I have no expectation these homes will retain these artificially high values. But because they are in good, safe neighborhoods, they will retain the steady rental income they provide me.

But at the same time, there are still homes in safe sections of Philadelphia that go for under 100,000. It's really all a matter of location. Your son will be able to afford a house, maybe not in your town, but if he puts in an honest day's work, he'll be able to afford a house in a safe neighborhood. Mind you, it may not be his first choice for a neighborhood.

Don't worry, FRiend, the market will correct itself. Once the interest rates start rising, the prices will come down.

No, I actually have two.

You're just on the wrong side of the market at this time...if you truely believe that a bubble will burst just wait it out and get in for the next cycle.

But, don't count on the RE market to just drop 30%, it will most likely just level out for awhile. It's kind of like when market forecasters say the "market" is overvalued and will crash...Usually sectors of the market go down in phases.......and likewise in RE you will see certain areas go down or stabilize...but don't count on Metro areas and popular burbs being in this...that is where the people want to go due to crime in the cities and long commutes too far out...the burbs will likely flatten and then increase at a normal rate for 5 years or so.

It's not an ideal situation, but there are alot of systemic reasons - many international - that are leading to these factors indirectly.

We are going to have to deal with it. The only thing I can tell you is give up on grandiose dreams of retirement and give your kids the best head start you can get for them.

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