It ain't over 'til it's over. Home buyers keep hitting real estate out of the park. The prices of existing homes rose in August at the fastest pace in a quarter century. New construction, sales of newly built homes and applications for new mortgage loans are running, routinely, at stratospheric levels. The Gulf Coast's horrific hurricane losses will scramble the numbers for a few months, but the national passion for real estate hasn't cooled. In fact, prices could jump in Dallas, Baton Rouge, Memphis, Birmingham and other cities where displaced families decide to settle.

How long will the price boom last? Until mortgage rates rise by enough to cap the offers that buyers can afford to make. Economist Mark Zandi of thinks we're close. An increase of 0.5 percentage points, to a fixed rate of 6.5 percent, would slow price gains to a crawl and push home values down in some of the most frenzied cities, he says. Realtors report scattered price cuts on expensive homes and in the most speculative markets.

That doesn't mean prices will collapse. Where some economists see a housing bubble ready to burst, others see a soft landing--"like the air coming out of a balloon," says David Lereah, chief economist for the National Association of Realtors. In Zandi's forecast, a handful of markets face declines of 10 percent or more (southeast Florida, San Diego, Phoenix, Las Vegas and coastal New Jersey), with another two dozen falling by 5 percent. In Lereah's version, Las Vegas, Washington, D.C, and other hot spots will continue to see gains--even if modest ones--thanks to steady demand from new people moving in.

Today's unprecedented housing streak rests on some real-world fundamentals. Jobs are plentiful, immigration stokes demand, incomes are rising among the well-to-do (the ones who make pricey offers) and the boomer bulge is reaching 50 to 60--the age group that controls substantial wealth. Besides city condos and houses, they're looking for second homes, driving up prices for any lot with a water view larger than a puddle.

Lereah sees a world of "rolling booms," where people priced out of one city migrate to others--if not Miami, then Charleston, Pensacola or Virginia Beach. California retirees can cash out of ranch homes for a fortune and buy a McMansion in low-tax Arizona or Nevada. Real-estate investors have lasered in on Utah and Idaho. Realtor Mike McNamara in Coeur d'Alene, Idaho, says that Californians are buying waterfront properties sight unseen, as well as newly built starter homes to rent or resell.

Just because prices have zoomed doesn't mean they're in Bubble Zone. In fact, based on a recent 26-year study, it appears that the annual cost of owning a home is currently just about average, compared with incomes and rents. But costs are highly sensitive to changes in long-term interest rates (adjusted for inflation), says economist Todd Sinai of the Wharton School in Philadelphia, one of the study's authors. In any city, the faster prices go up, the more they drop if mortgage rates rise.

And rise they will. Low rates and easy terms greased the wheels of the boom. As lending tightens, sellers will have to drop their prices or not sell at all. As for condos in Miami, look out below.

Most homeowners imagine that their properties will make them rich. But except in unusual periods, homes aren't terrific investments. Since 1980, the price on the median house has risen only 1.46 percent a year, adjusted for inflation, compared with 9.2 percent for stocks. Homes are even less profitable if you deduct the cost of taxes, insurance, upkeep, remodeling and repair. Their true value is as a place to live, not as an investment. "But try to convince a Californian of that," says financial planner Sherman Doll of Walnut Creek.

What will happen to your life if the value of your home flattens or falls?

Nothing, if you stay in the house and keep making mortgage payments. The only change is that you'll go back to building equity the old-fashioned way--by paying down your mortgage loan.

It's a bad time to borrow the equity out of your house or to buy a house with no money down. If you had to resell--because you changed your job, lost it or divorced--you might find yourself with no money left (or owing money to the bank). Once prices soften, they tend to stay soft for a long time, Zandi says.

But don't sit in a rental waiting for prices to drop so you can buy something cheap. Prices might not drop. What's more, you'd be losing your chance to stabilize your long-term homeowning costs, Sinai says. If you expect to keep the home for at least four or five years, there's more risk to staying out of the market than getting in.

Get in with a plain-vanilla fixed-rate or adjustable-rate loan. Mortgages that let you pay only the interest (or less) each month are bull-market dreams. A few years from now, payments on those loans will jump--a problem you may be expecting to solve by refinancing or selling out. But if prices flatten, you'll get trapped. I'm not saying they will--only that it's a good time to shore up your finances, just in case.