Will the stock market, your exchange traded funds (ETFs), and the U.S. economy be able to  weather the housing market cool off? Prices have continued to decline, variable rate mortgages are now kicking in with higher monthly payments, and foreclosure rates are hitting new recent highs, not to mention the $500 billion homeowners pulled out in equity. James Grant, of Forbes, says falling house prices in isolation wouldn’t create peril, a housing-induced downshift in job growth could.

An ETF to consider shorting amongst this action is StreetTracks SPDR Homebuilders (XHB). Although it had a huge move in the past 30-days, look for a correction in 2007. The top holdings include Champion Enterprises (CHB), MDC Holdings (MDC) and Sherwin Williams (SHW).

Tags: Homebuilders, Real Estate