With his last helping of old-fashioned ooga booga, "The Conjuring," still scaring up business in a few hundred theaters, James Wan returns with two more hours of seat-clenching scares in "Insidious: Chapter 2," a modestly scaled and highly pleasurable sequel to Wan's low-budget ($1.5 million) 2011 smash that should have genre fans begging for thirds. Indeed, with a clever coda that suggests how this franchise might easily continue even without the involvement of stars Patrick Wilson and Rose Byrne, there's no reason to doubt that "Insidious" could rival Wan's own "Saw" series for sheer longevity. In the short term, opening in a relatively low-wattage early fall market, the PG-13 pic should easily meet or exceed its predecessor's $54 million domestic gross, without conjuring up "Conjuring"-sized biz.

If we've learned anything from Wan's two previous films, it's that evil spirits haunt people, not houses. In the first "Insidious," that imperiled party appeared to be young Dalton Lambert (Ty Simpkins), son of Josh (Wilson) and Renai (Byrne), who landed in a coma after being entreated into a spirit world known as "the further" by a demonic old hag intent on possessing his soul. Only, as a last-minute twist revealed, it was actually Josh himself who had been pursued by said demon for decades -- and there was no guarantee she was gone just yet.

Fittingly, "Chapter 2" (again scripted by longtime Wan collaborator Leigh Whannell) begins with an extended flashback to Josh's own childhood and his first encounter with the hypnotist and medium Elise (Lin Shaye), who appeared to die at Josh's strangling hands in the first film's final moments. With this new piece of the puzzle in place, we jump back to the present, picking up (a la "Halloween II") exactly where the previous pic left off.

Looking to make a fresh start, the Lamberts have packed their bags and moved in with Josh's mom, Lorraine (Barbara Hershey, getting a welcome expanded role this time), who lives in just the sort of draughty Victorian fixer-upper that allows Wan and Whannell's imaginations to run wild. It quickly becomes apparent that the Lamberts have not arrived unaccompanied.

If the first "Insidious" often felt like an affectionate hat-tip to "The Shining," with its gifted child able to commune with the undead (via the nocturnal art of astral projection), "Chapter 2" continues the homage by having Wilson go full Jack Torrance on us, as the seemingly upstanding Josh starts to seem less and less himself, and possibly turning into something quite dangerous. That plus the appearance of some very unwanted house guests -- like a ghoulish bride who gives Renai a good thrashing about the living room -- prompt Lorraine to enlist some backup in the form of Elise's erstwhile sidekicks, Specks (Whannell) and Tucker (Angus Sampson). Eventually joined by another blast from the past -- the paranormal investigator Carl (a very good Steve Coulter), who first investigated the Lambert case with Elise all those years ago -- further into the further they go.

Wan and Whannell once again spin a ripping good ghost story here, populated by lots of restless spirits who ended their time among the living badly, a mother only Norman Bates could love, and a lyrical bit of time travel borrowed from Proust. They're terrific pastiche artists, freely raiding our collective storehouse of horror-movie memories and arranging them in fresh, unexpected ways. Even their own work is up for grabs, since "The Conjuring" in many ways resembled a period inversion of "Insidious," with Wilson as ghost hunter rather than hunted. But where so many sequels seem like mere remakes of their predecessors, with bigger budgets and less imagination, "Insidious" Chapter 2" feels like a genuine continuation of characters we enjoyed getting to know the first time around, and wouldn't at all mind returning to again.

If Wan is better than most genre directors when it comes to actors, he's even better with mysteriously possessed inanimate objects, bringing the audience's neck hair to attention with each creaking doorjamb, swaying chandelier and squawking transistor radio. He understands the innately creepy value of antiques -- objects that we know were quite literally touched by the dead -- and anything associated with childhood, that other irrecoverable past. Here, that simplest feat of sandbox engineering, a tin-can telephone, becomes perhaps the movie's most accursed object -- and something of a metaphor for Wan's joyously analog thrill-making in the digital era.

Working again with cinematographer John Leonetti (who shot both "Insidious" and "The Conjuring"), Wan makes artfully eerie business out of a Steadicam slowly prowling its way 270 or 360 degrees around a subject. Sound designer and editor Joe Dzuban also deserves kudos for his invaluable contribution to the pic's pervasively unsettling atmosphere.


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