Since the technology market bubble burst in 2000, real estate has been one of our most secure and successful assets. But before we make new investments—and when we consider how to manage our existing exposures—we should take heed of the growing chorus of concern over the state of the market, and whether it can maintain its upward trajectory.

Home sales reached all-time highs in 2003, and the price of commercial real estate in many markets continues to catapult upward. Publicly traded real estate investment trust (REIT) stocks, which are backed by pools of real estate assets, enjoyed a compounded annual return of 38.5 percent last year, trouncing the S&P 500, while providing a comfortable level of liquidity. “Everybody has decided real estate is the investment vehicle of choice,” says Mark Godsey, director of the institutional REITs trading program at Connecticut-based financial services provider Advest.

But a growing number of analysts worry that this poster child for post-dotcom investing has, in fact, emerged as an obese adolescent. Certainly, sales and construction data suggest the real estate boom is still going strong. Driven by mortgage rates running at 40-year lows, demand for single-family homes has been on the rise for several years. According to the National Association of Realtors (NAR), a record 6.1 million homes sold last year, compared to 3.8 million a decade earlier. The average price of single-family homes has soared over the last 10 years, from $97,000 to $170,000, consistently outpacing inflation. The construction industry broke ground on 1.85 million new homes in 2003, up from 1.7 million in 2002.

“Currently, we are projecting that home sales this year will decline slightly, but they remain at exceptionally high levels,” says David Lereah, chief economist for NAR. “With a strong demand for housing from a growing population, and in a recovering economy, we could be flirting with another record this year.”