After plummeting 46.63% in 2008, real estate mutual funds outpaced the S&P 500 by seven percentage points in 2009, delivering an average of 30.34%. This year, however, managers of these funds expect only modest, single-digit gains.

Perhaps the most telling harbinger of things to come for real estate mutual funds in 2010 was the recent report that existing home sales fell 16.7% in December to a seasonally adjusted annual rate of 5.45 billion, down from 6.54 million in November, which had held steady from the month before. In addition, the homebuyer tax credit expires this spring, and unemployment remains high.

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