Fortune magazine reports on a 'tale of two cities.' "If you want to know where real estate prices are headed in California's Orange County, the man to talk to is Gary Watts. The Mission Viejo broker has 35 years of experience and doubles as a spokesman for the O.C.'s Association of Realtors. 'Fifteen percent is pretty much in the bag for Orange County in 2006,' he says. 'It's impossible for prices to go down this year.'"

"Head 3,000 miles east and talk to almost any broker in Boston, by contrast, and he'll tell you that business has slowed in the past several months. Consider John Ford.. who employs 30 agents in three Boston area offices. Today he's averaging 14 property tours before a skittish client is ready to buy."

"The almost daily drumbeat of national statistics doesn't help sort things out. Is it more significant that we just had a fifth straight year of record home sales, or a third straight month of decreasing prices? 'No one really understands how these things behave,' says Robert Shiller, the Yale economist who presaged the dot-com crash and has lately been spending much of his time studying real estate. 'Looking for indicators is a little bit futile because we've never seen this kind of growth in housing before.'"

"In fact, the best way to get a handle on where the broader housing market is headed is probably to ignore the national numbers and heed the example of Scary Gary: Stay local, and always follow the inventory. Yale's Shiller surveyed Orange County residents last year on what they expected home prices to do over the next ten years. The average expectation was a 23 percent return, per year!"

"That kind of unbridled optimism has caused buyers to stretch beyond their limits. Southern California has become a hotbed for "exotic" mortgages, such as interest-only loans. 'One of the reasons we think this market will start to run out of gas at some point is that you've essentially created as much gold from straw as you can from this financial alchemy,' says Scott Simon, mortgage chief at California bond house Pimco."

"Recently there have been some signs of weakness. The rate of home price growth has decelerated dramatically, from 25 percent in 2004 to 14 percent in 2005, according to DataQuick."

"Boston isn't quite so fortunate. In the city's suburbs, single-family homes have gushed onto the market. Inventory increased to 4,281 by January, 79 percent higher than a year earlier. A company that tracks the downtown market shows an inventory increase of 61 percent in the last year. And 2005 foreclosure filings were up 45 percent in Suffolk County, which includes Boston. Prices are still holding up, but there are no Gary Wattses in Boston guaranteeing another year of gains."