(FORTUNE Magazine) – AMERICANS are just crazy about their houses. We babble endlessly about them, reciting the virtues of our new trash compactor or recalling in a kind of rapture the stained-glass windows in that gorgeous old Victorian we once owned. Entire dinner parties in suburbia can revolve around talk of mortgage rates and what sort of paneling Harry ought to put up in his den. We feel about our houses the way certain Frenchmen feel about fine cognac, the way most English people feel about fresh air. No surprise then that the U.S. Congress, answerable to voters, carefully preserved homeowners' advantages while putting together a tax reform package this year. Homeowners will still be able to deduct property taxes and mortgage interest charges on both their primary residence and a second house. As a result, tax reform is unlikely to cause major shifts in residential real estate markets. The new law does, however, complicate the lives of affluent Americans who have watched the value of their houses soar and want to cash in. If you belong to this lucky group but have not arranged to complete your sale by year-end, part of your luck is forfeited. On New Year's Day the rate at which capital gains will be taxed jumps from 20% to 28%; on the sale of a valuable house you will be out tens of thousands of dollars in taxes. But there is still incentive for many relatively affluent homeowners to make the transaction before the end of 1987. Starting in 1988, capital gains will be treated as ordinary income; married couples with taxable incomes between $71,900 and $149,250 a year would have their housing gain taxed at a 33% rate. The tax changes also make it important for even well-fixed would-be homeowners to stare hard at their budgets before buying. Because taxes are being cut for those in higher-income brackets, the value of real estate deductions won't be what it used to be. Taxpayers now in, say, the 42% bracket will face higher carrying costs when their rate drops to 28% in 1988 (see chart). Those willing to accept the greater expense may be able to snap up remarkable bargains in some parts of the country, particularly on vacation houses whose present owners bought them purely as investments. Under the new law owners of such property can no longer write off expenses in excess of the rent they collect and must depreciate the property over a longer period. Many want to bail out, and everything from waterfront condos on Cape Cod to ski chalets in the Rockies will be up for grabs. ^ The new tax law could dramatically affect the tumultuous cooperative and condominium apartment markets in New York City. In the past two or three years, as the continuing bull market on Wall Street created more and more freshly minted millionaires, prices for large apartments in prestigious neighborhoods have gone into orbit. An eight-room apartment on Manhattan's Upper East Side, which might have cost $100,000 ten years ago, now commands more than ten times as much, over $1 million. ''Everybody is amazed that the prices are so high,'' admits Edith F. Tuckerman, a vice president with the Douglas Elliman-Gibbons & Ives real estate group. Contributing to the demand have been investors buying apartments still occupied by renters in buildings converted to co-ops and condominiums. But like the ski chalet owners, these petty landlords could soon be leaving the market in droves. For the first time in a decade, prices of luxury apartments may level off. Tax reform aside, the value of residential real estate will continue to vary widely from place to place. Since 1980 house prices have soared in prosperous parts of the Northeast and California, while in Texas and other Western and Southern states, slumping oil prices and other dismal economic news have hammered values despite lower interest rates. For many of America's upper- middle-class families, the difference between being near-rich and nowhere- near-rich today is where they have lived during this period. For example, an executive who paid $500,000 in 1981 for a Greenwich, Connecticut, house like the one pictured on page 44 could probably sell his property now for $1 million. Assuming he put down 20%, or $100,000, the return on his investment would be 500%. But if he had put down 20% on the lavish Houston digs shown above, his initial investment would have been totally wiped out and he would owe the bank more than he could sell the house for. While such a comparison is admittedly extreme, the disparity between America's hot real estate markets and also-ran communities has never been greater. It presents both problems and opportunities for executives who transfer from place to place. In some parts of the nation, a vice president can live like a C.E.O.; in others a C.E.O. is hard pressed to live like a vice president. The temptation for an executive moving from a hot town, New York or Boston, say, to a chilly market such as Dallas would be to make a ton on his current home and buy a drop-dead Texas palace. Not a bad idea -- but only & if he intends to stay in Dallas until the local economy recovers, which could take a long time. If this executive is transferring for only a few years and plans to return to the Northeast, he might find his equity failing to increase as fast as prices back home. When he returns, houses in his hometown could have soared out of reach. A better idea might be for the manager to hold on to the current homestead and rent it out. Meanwhile, he could most likely still live in Texas splendor, but on a rental basis. THE EXECUTIVE moving from a weak to a booming market might consider renting out his current house until local prices improve. Selling at the bottom of a market and then trying to parlay whatever equity can be salvaged into something livable up north could lead to night sweats and unpleasant dinner conversations. The transfer game is always risky. But if an executive can hit a town just as the heat is rising, we are talking jackpot time. Take Greenwich. The attractions of this town of 60,000 situated on Long Island Sound are obvious. It is the nearest settlement in Connecticut and New England to New York City, affording a relatively brisk 30-mile commute. Six major corporations call it home, including American Can and United Parcel Service, and a dozen more are headquartered nearby. The town boasts four public beaches, a range of superb private clubs, excellent schools, and unusually low property taxes -- $2,800 a year on a $600,000 house. Even in the recessionary days of 1981 and early 1982, when house prices plunged throughout most of the country, they inched up in Greenwich. The community breeds a certain smugness. Says real estate agent Bradley S. Hvolbeck: ''We are known as the best town in the East to live in, and I am not afraid to say that.'' Still, it is hard to fathom why Greenwich real estate has appreciated so quickly in recent years. Overall, prices have surged more than 30% this year, and many houses have doubled in value since 1982. Very little lists for under $175,000 anymore. Jim Merrion, senior vice president at the local Coldwell Banker office, points out that many children growing up in Greenwich will not be able to afford to live there once they are out of college and ready to settle down.

Some of the lusher communities of Southern California have also been the scene of rocketing home prices. The regional economy has been generally sound, with expanding aerospace companies and flourishing Pacific Rim trade leading the way. In addition, someone is always making very serious money in the film business. The result, for certain towns within the Los Angeles sprawl, has verged on the bizarre. Three homes costing over $20 million are currently for sale in Bel-Air and Beverly Hills; $2 million will get you only a handyman's special in either. Some real estate agents catering to fast-lane clients have waiting lists of people willing to pay $2 million or more for houses they intend to tear down and replace with new ones. Things are not quite as wacky up the coast in the San Francisco Bay Area, but there too prices have zoomed. The effect is most evident in a town like Atherton, a gilt-edged community of 8,000 situated roughly midway between the city and Silicon Valley. Atherton features magnificent old homes placed snugly among rugged, brush-covered hills, as well as some of the finest schools in the state. The cheapest property for sale, a wee starter house hard by an extremely noisy freeway, lists for over $200,000. Average price: about $1 million, going up about 1% per month. Says Steve Bellumori, president of the town's board of real estate agents: ''The attitude toward life in general is very positive in this area. The weather is good, the economy is good, the quality of life is very good.'' REAL ESTATE BROKERS in boom towns tend to natter on like that. Those working grim markets such as Denver tell a different story. The Colorado economy has been hit by bad times in four industries -- mining, agriculture, semiconductors, and energy. Reagan Administration budget cuts have halted the inflow of federal bureaucrats based in Denver. Housing prices have dropped, though less dramatically than in other oil centers. Your basic three-bedroom Colonial still brings about $92,500, and most houses have lost only 2% to 3% of their value annually since the early 1980s. That may not seem like much of a hardship, but don't tell the fellow who paid $200,000 for his house five years ago and is having trouble dumping it for $175,000. This situation comes up often in Denver; for many corporate executives, it is a career way station. In residential real estate, Houston today is synonymous with bust. One large real estate agency reports that its median house listing was $110,000 four years ago and has now slumped to a little over $70,000 -- when a buyer can be found. Forget the city's condominium market. So many condos were built during oil's good years that there are now few buyers at any price. In the ! face of such an awful economic climate, local real estate agents and homeowners trying to unload property cling to just about any ray of hope. DeLora Wilkinson, president of Houston's board of real estate agents, speculates wistfully that the city has become such a cheap place to live that corporations might soon start relocating there. Bargains can be had in markets that are depressed but far less bleak: medium- size cities such as Eugene, Oregon, and Mobile, Alabama. Each has suffered a downturn in its leading industry. Some large lumber companies have forsaken Eugene (pop. 106,000) for the cheaper labor of the South and Southwest. The big paper mills near Mobile (pop. 200,000) have been hurt by an industrywide product glut. In either town an unadorned three-bedroom executive special sells for little more than $70,000. Buyers with more to spend can wind up in a mansion. ''You pay $160,000 for a house here that would knock your socks off,'' says real estate agent Andy Anderson of the Coldwell Banker Curtis Irving agency in Eugene. Even a top-of- the-line house with, say, four bedrooms, three baths, and a sauna will not cost much more than $200,000. For that price in Mobile you might find a stately, antebellum Colonial with a swimming pool and a slew of marble fireplaces. For a mere $60,000 you can pick up a nearby two-bedroom condo on the Gulf of Mexico. That's a nice condo, right on a sugary-white sand beach, less than an hour from town. By the way, Alabama has the lowest property taxes in the U.S. Typical tax bill on a $200,000 home: $350 to $400 per year. THOUSANDS of communities large and small have not experienced roller-coaster real estate prices. The dozen suburbs north of Chicago along Lake Michigan include some of the finest residential neighborhoods in America. Known as the North Shore, the area boasts terrific schools, good recreational opportunities, and a relatively painless commute to the city. Some towns, such as Winnetka and Lake Forest, even have social cachet: They are dotted with estates costing many millions. There is nothing amiss with the local economy. But the market, for no apparent reason, is less frenzied than in the Northeast or California. Though prices have risen steadily at 8% to 10% a year, for $200,000 an executive can still find a comfortable residence with all the amenities. Of course, every home, no matter how sweet, is much more than someplace to live. For most Americans the houses they buy are the most crucial investments . they make. Homeowners in Houston or Denver are living in the equivalent of cyclical stocks currently out of favor; about all they can do is hang on and hope for a change in the economic climate. In cities such as Eugene or Mobile, owners can be more relaxed. The price of admission is so low that their homes are like obscure, inexpensive over- the-counter stocks. Lightning can strike; buyers might suddenly discover the joys of Oregon's mountains or Alabama's beaches. But if that never happens, no one has been badly burned. Owning a home on Chicago's North Shore can be comfortable too, like living in the economic equivalent of nice, safe, blue- chip stocks. But the real action these days is in places like Bel-Air or Greenwich, especially if you moved in before prices took off. You keep staring at your expanding net worth, wondering how long the fun is going to last. Your house is a glamour stock.

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