This San Francisco Chronicle report shows why the housing bubble is spreading. "For nearly 2 1/2 hours one night recently in Mill Valley, a capacity crowd of 300 people looking for the next hot real estate deal listened raptly as an insider revealed the best cities to buy bargain houses. None was in California. The back-to-back programs weren't isolated efforts to woo investors and homeowners into taking money out of California's pricey residential market."

"'The economic numbers don't readily work here anymore,' explained Michael Morrongiello, program director for a Sonoma investment club. 'It's tough for the average investor to acquire rental homes (or) multiple units, here in California and particularly the Bay Area.'"

"Not only will individual and institutional investors look beyond the Bay Area, according to the reports, they will even rummage through largely ignored tertiary cities. 'I'm going to places the average investor doesn't, such as South Carolina,' said Mike Sarwri. 'In California, you're spending $600,000 or $700,000 for an average property..and you could take that money and buy four or five' houses in Dallas or Oklahoma City."

"But investing out-of-state is not without peril. Some late-to-the-game investors got singed last year when housing prices tumbled in Las Vegas' torrid housing market. Last year's condo craze also may have hit the wall. Preconstruction condo sales, one of the riskiest gambits for investors, left some speculative buyers with heartburn in Florida and Las Vegas. So did a glut of condo conversion projects in Miami and San Diego."

"Other investors turn to facilitators such as Adiel Gorel, president a firm that matches investors with new-home builders. Gorel initially concentrated his efforts in Las Vegas, Phoenix and Orlando as California buyers sought refuge from the state's sky- high prices. In the last year or two, those once inexpensive secondary regions have become 'little bubble markets' themselves and no longer offer good investment opportunities, he said."

"'Now I see a migration to the third type of market, which is a no-bubble market. Those markets did not participate in the bubble, and they're the ones poised for appreciation,' said Gorel. Gorel said his best bets include Austin, Houston and Dallas in Texas; Oklahoma City; Nashville; Montgomery, Ala.; and Charlotte, N.C. 'You're investing in the right market when you hear the name of a city and you feel utter and intense boredom,' Gorel told the crowded room."

"Two years ago, condominiums also started to catch the attention of investors, especially after word got out about the huge windfalls some received through preconstruction purchases. That preconstruction scenario attracted some three dozen people to the Walnut Creek meeting. The curious group saw picture- postcard scenes of warm Florida beaches and a mockup of a 15-story condo in downtown Clearwater; prices at the development; ranged from $406,000 to $1.1 million."

"'We have about 15 left' to pre-sell, said realty agent Karin Udolf, representing the developer. The developer already has announced plans to raise prices by 15 percent once the construction loan closes, she said, with 'instant equity for the investor of 15 percent.'"

"Both Emerging Trends and Marcus and Millichap's 2006 apartment forecast urged investors to keep a close eye on the condomania, especially in regions where overdevelopment has produced an excess of properties. Almost 150,000 apartments were sold nationally for conversion into condos last year, according to the Marcus and Millichap report. The brokerage firm called condo conversions 'something of a wild card,' because thousand of units could return to the rental market if buyer demand, and consequently prices, decline."

"But the Emerging Trends report was less sanguine. While 'Orlando and Tampa have lower-grade condo conversion fever than South Florida markets,' the report said, 'South Florida and Las Vegas may be disasters waiting to happen.' Such downturns could hurt short-term condo investors who expected to sell quickly. And rental owners could see an increase in empty apartments and lower rents."

"Emerging Trends also offered another word to the wise: 2006 is not the year for speculators and their 'buy and flip schemes.' 'Tune out those infomercials,' the report said. 'Buyers should bypass neighborhoods and projects where speculators have been active until prices settle or bottom out.'"