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The new federal housing bill sounds the death knell for "down payment grants". Such "grants" are down payment assistance schemes that have been exploiting a loophole in federal lending laws.

That loophole allows non-profit organizations like AmeriDream and Nehemiah Corp. to gift down payment money to home buyers. In actual practice home prices are inflated by as much as 6% so the seller can reimburse the non-profit for the grant.

The latest housing bill is just another signal the there is plenty of trouble ahead for real estate investing. If you are a real estate investor you should be very aware of the United State's deepening economic slump.

The unemployment rate has hit a four-year high and employers recently slashed jobs for the seventh consecutive month. Some economist are predicting that an additional 500,000 jobs could vanish in 2008.

Look at some of the hurdles facing real estate investors. No more down payment grants, the loss of tens of thousands of jobs, the rising cost of energy and food. Those are all things that will keep people from buying homes. But there's more!

An unprecedented number of citizens, sick of this nation's failed politics and weakening economy, have departed for other countries, with even larger numbers planning to do so soon.

Data collected in seven polls conducted between 2005 and 2007 seem to indicate that at least 3 million U.S. citizens a year are choosing to live in other countries. The surprise is that the largest number of relocating households is not the people approaching retirement, but productive adults ranging from 25 to 34 years old. Those are people in the prime home buying age group.

Couple that information with a reduced number of emigrants due to stricter emigration laws and you reduce the number of potential home buyers by a few more millions.

A dramatically reduced number of home buyers is more bad news for a real estate market that has something like 2-million vacant homes waiting to be sold.

Lenders burned by waves of mortgage defaults are now very reluctant to lend money to home buyers. They have thousands of bad loans on their books and they are being very careful not to create more. Credit requirements have been tightened and down payments have increased.

To qualify for a mortgage loan today you actually have to prove you have the ability to pay it back. That sounds sensible, but it's something that has not been required in recent years and is one reason the country is smack in the middle of a housing crisis.

Let's not look closely at the latest housing bill created by that crowd in Washington. Their clumsy attempts to "fix" things usually end up creating even bigger problems.

That leaves the question, "What is a real estate investor to do?"

If you are holding leveraged property take your loss as quickly as possible. There is nothing to indicate that real estate values will not continue to decline for the foreseeable future.

What new investment might have the best chance for success? In most every metropolitan area in the U.S. workers are going to need affordable rental housing in city centers or places of employment. They no longer can afford to commute. They have no choice, but to live near where they work.

Good rental properties near employment and reliable public transportation may be one of the bright spots in today's real estate market.