NEW YORK (MONEY Magazine) - Home sales are slowing. Condo prices are slipping. Sellers can't get their asking prices.

And even real estate bulls are now waving the caution flag.

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If you're expecting a short-term gain, "you should be looking elsewhere," says Christopher Mayer, a Columbia University economics professor who not long ago argued that land shortages and rising populations would translate into ever-rising prices in "superstar" cities like New York and San Francisco.

Clearly, it's time for a re-think, whether you're mulling over buying, selling, refinancing or remodeling a home or investment property. Or if you're just wondering, Is our house still worth what we think it is?

The short answer: It depends on where you live. If you reside in one of the past decade's boom markets along the coasts or in the Southwest, brace yourself. Prices there were powered by two kinds of fuel: low interest rates and the willingness of buyers to pay up for the American dream.

That tank is almost empty.

In Los Angeles today, the median dream goes for 10 times the median income. That's unsustainable no matter how creative banks are in coming up with new hybrid loans.

Mayer thinks that, with fewer people buying but plenty still hoping to cash out, prices in the most expensive markets could drop 15 percent in the next year, if mortgage rates rise another point. The forecasters at Fiserv Lending Solutions and Moody's Economy.com, who crunched the numbers for our 12-month nationwide forecast, aren't so pessimistic, but they're hardly Pollyannas.

Prices will flatten in most ex-boomtowns this year, and next year will be worse, says David Stiff, Fiserv's chief economist. "A lot of markets - particularly those where prices have increased dramatically compared with income - will see drops by late 2007," he says.

Those declines are expected to range from a few percentage points in Boston to as much as 20 percent in Miami and Las Vegas, says Economy.com's Mark Zandi. The more unhinged prices are from local incomes, the more likely a fall.

That doesn't mean, however, that real estate is about to crash across the United States.

First, if you live someplace that hasn't gone wild - think Atlanta or Philadelphia or just about anywhere in the Midwest or Texas - you'll see slower rates of increase, but losses aren't likely. "There are sizable parts of the nation's housing market that will be just fine," says Zandi.

Second, a strong economy and job growth should hasten a return to a normal housing market in which prices rise just a bit faster than inflation. Since World War II, notes Stiff, the housing market and the economy have moved largely in sync.

Then, starting in 2002, the Federal Reserve's rate cuts in the wake of the tech meltdown and 9/11 kept home prices rising even as the economy stalled. "Now, as the housing cycle unwinds," Stiff says, "the rest of the economy will keep growing. That puts a floor under prices and will let housing and the economy sync back up."

The caveat, of course, is that if the economy falters, housing will really start to look overvalued.

So what do you do? If you've got a place you like, a mortgage you can handle and no plans to move or build a new wing, relax. But if you're active in the market, or you soon might be, rethinking is indeed in order.

Again, your strategy should depend on where you live. MONEY found owners, sellers and buyers making smart moves in three very different markets:

• Cashing in on the last of the hot spots. Spotlight: Albuquerque
• Get the most from a go-slow market. Spotlight: Atlanta
• After the boom. Spotlight: Providence