Worried that, at the peak of the real estate bubble, you might be paying too much for a home? Or that your property may not only appreciate by a smaller amount, but even decline in value in the next two years? You’re not alone. With this in mind, the PMI Group has developed a new formula that it claims detects bloated real estate prices. The Walnut Creek, Calif., company, one of the largest providers of home mortgage insurance, is attempting to quantify the bubble - something we all know exists but can be difficult to monitor.

According to Sunday’s Hartford Courant, the PMI Valuation Index tracks the historical home price appreciation in areas throughout the United States, then breaks down the deviation from historical data in the present-day market. The results have highlighted a number of areas that are extremely overvalued. The expected rise in mortgage rates, along with any local economic decline, could cause price devaluations in such areas, PMI warns.

On PMI’s list of the most overvalued markets in the U.S., we find many of the usual suspects:

• Los Angeles, Calif. — 33.7%
• San Jose, Calif. — 26.5%
• Las Vegas, Nev. — 25.5%
• Tampa-St. Petersburg, Fla. — 23.2%
• San Diego, Calif. — 22.3%
• Phoenix, Ariz. — 22.0%
• Miami, Fla. — 20.5%
• Orlando, Fla. — 19.6%
• Providence, R.I. — 19.1%
• Washington, D.C. — 18.2%

As you might expect, California and Florida real estate, along with a number of other East Coast markets, are priced significantly higher than historical norms and, as a result, might come crashing down to earth. Contrast the above figures with Denver real estate, which is 4.2% undervalued, or Detroit, where prices are 10.3% below where they should be according to the normal growth patterns.

PMI has also implemented a “Market Risk” index that gauges the possibility of decline in the net pricing of houses in the same areas. This statistic not only takes the historical home pricing data into account, but uses a number of other factors - employment, household income, local economic growth - to predict a dropoff in net prices within the upcoming 24 months. By this measure, Boston, Mass., is ranked the most likely (a 55% chance) to experience such a decline. San Diego and Los Angeles are close behind at 54% and 46%, respectively.

Suffice it to say, this is not good news for buyers in these areas. Be sure to use extreme caution when house hunting and be sensitive to the overpricing in these markets. Do whatever you can to receive price concessions from sellers. No one wants to come away with any investment worth less than they paid for it, and with something as expensive as real estate, you cannot afford to take that risk. Another option, of course, is to seek out a more stable area. Indianapolis, Cleveland and Columbus, among other cities, have less than a 6.5% chance of price decline, and are already undervalued, according to PMI’s data.

Midwest, anyone?