(FORTUNE Magazine) – If you're looking to buy a home, give the housing market a cheer. If you're selling, give it two cheers. Home prices have been rising modestly, about 3% to 4% during the past year, and they're likely to keep doing that, though with sharp regional variations. In most places, that means they won't soar out of reach of buyers, yet prices should be frothy enough to satisfy sellers. Rising mortgage rates will pinch off some price appreciation as new buyers qualify for smaller mortgages. But real estate professionals are confident that job and income growth will be sufficient to buoy the market. Says David Arts, chief operating officer of a Century 21 Realtors group in the Midwest: "The economy is good, confidence is good, and affordability is good, and that's what's important." Century 21's average selling price in the Midwest rose 4.1% last year, and prices are up 3.6% through March of this year. Mortgage rates have risen since then, but Arts says anecdotal evidence from the field doesn't suggest a negative impact. Home prices in Midwestern cities like Detroit and Cleveland will rise 3% during the next year on continued gains in manufacturing, predicts Regional Financial Associates, an economics consulting firm. Population increases will drive 1994 prices up most rapidly in Florida, and in the Mountain States, predicts RFA. Last year Denver posted 12.7% appreciation, reports Case Shiller Weiss Inc., a Cambridge, Massachusetts, firm that compiles home prices data. Centex Homes is putting through double- digit price increases on its newly built houses in Denver, and in Phoenix as well. By contrast, California prices continue to slide, pushing values in some Los Angeles neighborhoods down 30% from where they stood in 1990. Case Shiller reports that high-priced homes depreciated most in Southern California during the past year, and that less expensive houses -- where prices had held steady in recent years -- fell as well. UCLA economist Nelson Pedrozo predicts lower- priced homes in Los Angeles should stop declining by year-end because of renewed demand from first-time buyers. Even with the recent run-up in rates, Pedrozo calculates that because of the soft market, buyers' monthly payments would be as much as 50% less in some cases than if they had bought a few years ago. Northeast prices have started to perk up on the strength of a modest economic recovery. Freddie Mac, the big provider of mortgage funds, says home values in Massachusetts rose 2% during the past year, after several flat years. And New Jersey prices spurted 1.3% in the first quarter alone. Peter Degnan, president of Prudential Degnan Boyle Realtors in northern New Jersey, says prices in some locales have jumped 10% because of trade-up and transferee activity. Such upscale buyers are taking over market leadership from first-timers elsewhere as well, causing price spikes in tonier neighborhoods. David Arts says prices in Chicago's northern suburbs surged 15% in March from a year earlier. Toll Brothers has been selling expensive homes in White Plains, New York, at such a rapid clip that in seven months it was able to raise prices by $101,000, or 18%, to $664,900. The pall hanging over all this, of course, is rising mortgage rates. Real estate professionals think rates over 9% would take a toll, and that 10% could shut the market down. Right now, however, those rates are still at bay, and the outlook for home prices is good. -- J.S.

BOX: PERCENT CHANGE IN HOME PRICES DURING 1993

TOP FIVE MARKETS Denver 12.7% Salt Lake City-Ogden 9.7% Miami-Hialeah 8.3% Nashville 7.0% Portland 7.0%

BOTTOM FIVE MARKETS Los Angeles - 11.7% Oxnard-Ventura - 8.6% Sacramento - 8.1% Anaheim-Santa Ana - 5.7% Riverside-San Bernardino - 4.4%