How to exploit a bad real estate market?
 

How do you exploit an overpriced regional real estate market?

I strongly believe real estate prices in Utah will be less a year from now than they are today. Even if I knew this with certainty there is no way to profit on such knowledge, right?

Can you short REITs?

Wait a few months for the recession in durable goods to really hit and get yourself some good deals on appliances, furniture, etc. You could short Whirlpool and Shaw and such if you think things are going to get much worse nationally.

Traditionally you could short regional banks in the overpriced areas, but nowadays home mortgages are bought and sold nationally. I think most regional banks have only a very small exposure to home loans, though they may have more exposure to commercial real estate loans, business loans in the building trades, etc. However, a lot of that bad news is already priced into the market. So much in fact that all regional banks have taken some hit in prices, even where the regional economies are doing well. An example is in Texas - Cullen Frost Banks (CFR) reported today a 13% increase in profits. So CFR taking a big haircut on a day that Washington Mutual reported big losses was not entirely logical (last week, if I recall correctly). Sometimes one can exploit market hysteria that way --find the gems when the market is throwing an entire sector in the trash heap.