How to play the burst of the housing bubble?

Question

looking for investment ideas on how to play the burst of the housing bubble which is taking place right now in the united states. i am not interested in investing in real estate directly however. (i have no interest in being a landlord)

any suggestions?

Answer 1

I think you are a bit late if you are trying to play more decline.  Any major move should be done, even if houses continue to decline for a bit.

Anyway, the classic way to invest or trade real estate would be in real estate equities.  This would include listed agencies, housing construction, construction materials and equipment, ETFs, you will have several options.

Just go to a decent screener like yahoo (I just checked it to make sure it has real estate -- http://screen.yahoo.com/stocks.html )

Be very careful.  In certain areas especially, there are people in debt that just don't care -- they buy expensive cars and houses (anything that sometimes surprisingly lenient credit score limits will allow them to put a down payment on) that they can't afford, never pay these bills, and end up scooting out by declaring bankruptcy.  It's really really terrible.  My brother is a real estate agent in an area like this.  Certain companies are suffering worst than others.

Answer 2

Well if you had wanted to short it you should have shorted the REITs (Real Estate Investment Trusts) a couple years ago.

Other than that I can't think of anything else you can do right now. I mean the housing bubble already burst.

Answer 3

You could short some publicly traded home builders, but they've already dropped quite a bit. May be too late as the other poster indicated. But if it's your conviction that things are going to get worse from here, that would be your best play. You also might want to short some mortgage lenders. Very risky though.

Answer 4

Like most people who ask these type of questions, you're too late.  Its mostly over with.  But look at the banks, and other financials.  As a result of the housing bust many of them are oversold and have very good valuations.  But I would stay away from Freddie and Fannie.  They are still holding the bag and I wouldnt be surprised if their equity was wiped out and they were recapitalized.  The government will support the function that Freddie and Fannie perform.  But they wont support the stock itself.  Shareholders always bear risk.

Answer 5

You are very late to this game. About a year late. There are ETF's that short financials, you can buy puts against banks, you can sell calls ( a very risky strategy). Frankly, the big money has already been made on this. Now, the credit card companies are finding defaults increasing dramatically. You can short the public companies like Visa and Mastercard, but again, you are way late to enter a position. The time to do this would have been July of 2007 all the way into June 2008. Fannie Mae and Freddie Mac also fell sharply. The fall is now built into the price, plus the Fed and Treasury Dept is rescuing them. One area you may look into is commercial real estate. That area is drowning, too, and next year they expect the A-Alt mortgages to start to reset, so defaults are going up. Check out the reits that specialize in commercial real estate, and talk to your broker about a strategy that works with your risk tolerance.