(Photo: Joe Zeff)

If the threat level for the 2002 real-estate market was Code Yellow, crank up this year’s to Code Orange. Driven by the weak economy and terrorism fears, prices and rents fell last year by double digits in some neighborhoods, but record-low interest rates, and no actual terror attacks, kept prices surprisingly strong—even rising—in other parts of the city (see “Welcome to the Neighborhoods,” for prices, new developments, and predictions on 25 prime neighborhoods). What do the best minds in real estate see ahead—other than war with Iraq? Depends on which one you ask. On the one hand, a long, messy war, a fresh round of corporate layoffs, or, say, smallpox in the subway could send prices plummeting. On the other hand, Osama could lie low, the economy could begin to turn, and the unpleasantness with Saddam could start and end with surgical swiftness. People could get comfortable again, and real-estate prices could line up and resume their reassuring climb. Since the experts are just about as divided on this as you and your spouse are about duct-taping the windows, we’ve assembled the best evidence on both sides. Read on, and pick the outlook that suits your anxiety level.