NEW YORK (Money Magazine) - Forget book clubs and poker nights. America's property craze has spawned a new social network: The real estate investment club.

Across the country, dentists, retirees, janitors and even teenagers gather each week in hotels, buffet halls, synagogues and the like to sniff for scuttlebutt and attend get-rich seminars with titillating titles like "Turn an Ugly House into a Pot of Gold" and "Exploding Profits Through Bankruptcies."

California now has more than 40 such clubs, Florida 50. The Georgia Real Estate Investor Association has grown so large -- its main monthly meeting can draw 1,000 -- the group recently bought a building to host an almost daily schedule of confabs.

In Texas, Randy Steadham, a former oil services exec who is president of the Realty Investment Club of Houston (none too subtle acronym: RICH), says his membership has quadrupled since 2001, to 2,100 people.

"I for one," he drawls, "have pulled all my money out of the stock market and put it into real estate."

Hmm. Substitute the words tech stocks for real estate, margin loan for interest-only mortgage, and the housing boom takes on an ominously familiar tone.

The question isn't whether home values across the country will vaporize all at once, as the Nasdaq did. (They won't.)

It's whether too many people are acting as if nothing bad could happen.

Let's be clear: No one knows when home prices will top out in your area.

History suggests, however, that it'll happen not long after homeowners and buyers reach maximum certainty that they've discovered the fail-safe key to riches.

Considerable anecdotal evidence suggests that fateful time may be near.

Consider:

Last year, 34 metro areas (15 of them in California) showed double-digit price spikes. Many homeowners seem to expect these kind of gains forever.

A survey of nearly 700 owners in Boston, Milwaukee, San Francisco and California's Orange County by Karl Case of Wellesley College and Robert Shiller of Yale finds that the average person in counting on double-digit growth each year for the next 10 years.

Reality check: Over the long run, housing has risen at around one percentage point a year ahead of inflation. That implies more T-bill-like returns in the future.

The number of people with million-dollar homes has grown so quickly the Census Bureau has had to add a new upper-end entry to keep pace. Based on a comparison of median home values (nationwide: $191,300) with median incomes, the U.S. market is more expensive than at any point since World War II.

The median home now sells for more than twice what its occupants make; in some areas the price-to-income ratio is double that or more.

In Boston, the median home sells for 3.3 times median income. In San Diego it's 5.2 times and in San Francisco 4.2 times.

If interest rates rise, as they're expected to do, housing will get less affordable still.

Sales of existing homes fell 3 percent in July from June's record pace.

At the current rate of sales in Orange Country, there are now five months' worth of homes on the market, compared with just one month's worth earlier this year, said one agent.

And in Las Vegas, where prices soared 52 percent in 12 months ended June 30 (the greatest one-year jump for any metro area ever), sales have dried up faster than a desert oasis.

"Two months ago I couldn't keep a listing for a day," said Prudential Americana agent Leslie Carver. "Now no one has looked at some of these in weeks."

With $6.8 trillion in mortgage debt at year-end, banks now own 45 percent of our homes, the highest level on record.

And although interest rates have begun to climb, borrowers continue to embrace adjustable-rate mortgages (ARMs), which will constitute an estimated 32 of mortgages financed this year, versus 19 percent in 2003.

In hyper spots, like California and the Northeast, people looking for the lowest monthly nut are increasingly betting on a dubious gimmick: the interest-only ARM, in which your entire monthly payment goes toward interest and zippo pares down principal.

"Your essentially your renting from your bank with an option to buy," warns Northern Trust chief economist Paul Kasriel.

If you're a homeowner who has locked in a comfortable fixed-rate mortgage, you can probably weather any downturn with little worry.

But this is no time for a big cash out refi or home equity loan. They will cut away your equity margin of safety and, if you're unlucky in a real estate crunch, leave you owing more than your home is worth.

A common sense credo for deciding how much to cash out: never take more than the IRS will let you deduct. (The most you can deduct is the interest paid on the amount you borrowed to buy or improve your home plus the interest on as much as $100,000.)

A second strategy to consider: downsizing. That's not to suggest you try to time the market by moving into a rental to wait out a storm that may never strike.

But if you're already thinking about trading in Casa Grande for cottage living, there's no point in trying to squeeze out the last iota of appreciation.

As economists like to say, if something can't go on forever, it won't.

"Year over year at the end of the second quarter of 2006, foreclosure activity in California has increased more than 67 percent," says Alexis McGee, president of Fair Oaks-based ForeclosureS.com.

The once hot housing markets in Las Vegas and Phoenix are cooling off rapidly and defaults there are on the rise as well, she says.

"Both Las Vegas and Phoenix were impacted by speculators," says Ms. McGee, and more than 25 percent of new home sales in both markets were going to out of state investors who had no intention of ever occupying the homes they purchased.

Now those who came late to the party find themselves squeezed by rising interest rates and resulting negative cash flows, she says.

“The speculators are definitely on the run, and walking away from properties they cannot afford to hold and cannot sell at a profit," says Ms. McGee.

In Colorado, foreclosure activity has put Denver well up in the top 10 of metro areas with the highest foreclosure rates, according to Foreclosures.com’s figures.

“Almost 5,300 homes in Colorado have already been lost in foreclosure and, as of August 11, over 11,300 were in the pre-foreclosure process," says Ms. McGee. She cites recent reports by economists that showed that Colorado was lagging behind the rest of the nation in economic recovery from the 2001-2002 recession.

"A more severe situation, however, is in California," she says. "A primary reason is the overwhelming use of so-called creative mortgage products people were sold in order to buy ever more expensive homes."

More than $1 trillion of these exotic mortgages were due to reset in the next 18 months, she says, "and payment shock to such homeowners would be severe if not financially fatal." 


Well Bakersfield, what's it looking like? We all know what the Real Estate Professionals want us to believe. What's the "Real Deal"?

Why must things change? 

I actually liked the Bakersfield that Jonny Carson used to poke fun at, on the Tonight Show. To me, his shots were funny, because everywhere has its little quirks. Bakersfield had its own, and I loved every one of them. They were natural and honest. They were testiment to the culture built by hard work and tough people. 

Kern County never had the metropolitan draw of the Beach or temperate weather of Southern California, and never will. What it had were perfect soil, a long growing season and OIL. Lots of oil. These were great attributes for dirty, gritty, hard working souls who were willing to take advantage of them to carve out a life. These are the people of my ancestry and I'm proud of them, quirks and all. 

I realize that change is eminent, but why? Why are the ingrained cultural, quirky local attributes suddenly so unfavorable to those who now take up residence here? This isn't Southern California or the Bay Area, nor will it ever be. It simply can't. As different as Southern California and the Bay Area are, so is Kern County. Unique isn't bad, it's just different. Kern has a totally different appeal than the two other regions. I like it. Why must it change? As I tell my kids; This WAS the Wild West, Gold, Farming, Oil and all.

Kern County is home to me, just the way it was/is.