Housing prices were increasing to overwhelming heights. It was unstoppable even as mortgage rates went up.

Financial planner Charles Failla began selling off real estate holdings, among them, Real Estate Investment Trusts (REITs). He trimmed his real estate exposure to 15% of his total investment portfolio. Projections from Moody's Economy.com show a cooling in the upward spiral of single-family home prices nationwide - and eventually very slight price drops in 2008 and 2009.

One example is to those who foresee a softening property market can take short positions on housing stocks. When the more sophisticated investors short stocks, they sell the stock now and then buy it later, when they think the price will be lower. Even wealthy investors can buy capital-protected bear notes.

In the case of real estate, the contracts allow investors to bet on the rise or fall in home prices in six individual cities. Because of this, S&P recommends 45% points should be in U.S stocks, and 20% points in foreign shares.

Among stock picks, analysts stress holdings of energy and financial stocks, such as those of banks, brokerages and insurance companies. Hugh Johnson, chief investment officer of Johnson Illington Advisors, suggests two strategies for a softening real estate sector. He said that you should sell a house if you bought it to speculate on a rise in its price; and in your investment portfolio, avoid housing and home furnishing company stocks.
 
By M. Sese
http://realestatepress.org