It looks like we're one step closer to being able to short real estate. There's a company called HedgeStreet (Via The Big Picture) which allows trading futures on housing prices and mortgage rates. It's not quite the same as shorting a house as there's no underlying asset being bought and sold, nor even an option on an underlying asset; rather, it's basically a bet on which way prices (or rates) will go.
The web site is terribly slow so I haven't read all of the details. If it gets significant volume, it may become a valuable tool for predicting future prices, as markets seem to be pretty good at this type of thing.
The state is that great fiction by which everyone tries to live at the expense of everyone else. - Frederic Bastiat