BEND, Ore. (CNN/Money) – Home prices continue to defy expectations, but some owners are starting to weigh the pros and cons of holding out for more gains or walking away from the table.

In late June, Darren Smith sold a rental property he'd owned for a dozen years because he believed his market has finally reached its peak. "There's no way I would spend $300,000 on a two-bedroom townhouse," he said of his Bridgewater, NJ property, which he sold for that amount. "That's crazy."

Meanwhile, the rapid appreciation of home prices in and around Honolulu, Hawaii has prompted Capt. Jennifer Bager and her husband, Capt. Scott Bager think twice about holding onto their house after the Army transfers them off the island next year.

"It is in a military community and, thus, a great rental market," said Bager, whose house has appreciated $200,000 in four years. "But we are wondering if we should go ahead and sell while the market is up."

It's a tough call.

Just when it seems prices couldn't possibly go any higher, they do.

On Thursday, the National Association of Realtors reported that 49 metros had double-digit price gains between the second quarters of 2003 and 2004. Median prices in Las Vegas increased a record 52.4%. (Click here to read more.)

If you like your house, can afford the mortgage payments and plan to stay in the area for a while, it's probably wise to just to ignore the market and sit tight, said Peter Wheeler, a certified financial planner in San Diego, where the median home price is now about $560,000.

"I could probably make a quick $300,000 above what I think my house is really worth, but I don't want to move. I like the house," said Wheeler. "If the market value of the house is less a few years from now, so what?"

It's quite another story if you plan to move anyway, are up to your ears in house payments, own several properties or have neglected your 401(k).

Such scenarios, say planners, may warrant a "For Sale" sign.

Some people simply have too much tied up in real estate, say financial planners. "For a lot of households the increase in equity is going to overshadow all of their investments combined," said Barbara Steinmetz, a certified financial planner in Burlingame, Calif.

While there may be little you can do to hedge the equity in your primary residence – other than to keep saving in other assets – cashing out may make sense if you have real estate invesments and need to "rebalance" your portfolio.

Steinmetz is recommending that one of her clients sell some real estate and invest the proceeds in a portfolio of mutual funds. "I was concerned, not because I'm afraid of a downturn in the real estate market, but because there's no diversification," she said, explaining that the client owns five or six properties but has little saved elsewhere.

Homeowners who are highly leveraged are more vulnerable to price declines, say planners.

"I had a couple come in with a negative amortization mortgage on a house that costs way too much relative to their income," said Chris Cooper, a certified financial planner in Toledo, Ohio. "They're consuming real estate, not investing in it."

Unless a raise is in their immediate future, the "house rich" and "cash poor" may stand to benefit from cashing out and downsizing, assuming prices are still within reach in their area.

Homeowners in hot markets often wait until the last minute to put their house on the market. Why? "It will sell in less than a week," said one owner in Riverside County, Calif., where prices increased 38.5 percent in the past 12 months, according to the NAR.

If a move is imminent, though, you may not want to assume a sellers' market. "My daughter and son-in-law sold their condo (because of a troublesome downstairs neighbor)," said Wheeler. "They are in a rental waiting for the market to go down, and I think they are right in doing so."

In the case of Jennifer and Scott Bager, the big question was whether it makes sense to sell or rent out their property. "Most people would say take the money and run," said Bager. "We're leaning toward that."

That's probably a wise choice, said Steinmetz. "When you have one primary source of rental income, that's scary," she said, referring to the large military population. Besides, it's not easy being an absentee landlord.

Before you list your house, of course, you'll want to consider the tax implications of selling.

For most homeowners, the home is the biggest tax shelter of all – assuming you've lived in the house for at least two of five years. Married couples who both live in the house for two years don't pay taxes on gains of $500,000 or less, while single homeowners can exclude gains of $250,000 or less.

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If you live in your house for 23 months and sell, you're out of luck. You'll have to pay the long-term capital gains rate – generally 15 percent – on any profit. Your gain is calculated by looking the difference between your "basis" – what you paid plus initial closing costs or home improvements – and the selling price, minus broker fees or closing costs you pay.

If you live in the house for less than a year, you pay ordinary income tax.

There are some exceptions. If a change in employment, health or unforeseen circumstances – such as divorce or a twin pregnancy – force you to move, the capital gains will be prorated.