Totally agree with EconProf and the others who are warning you away from this. The housing bubble is just one effect of the larger credit bubble — it’s what is most visible to people who don’t usually follow the various markets. While none of us has a crystal ball, the one thing we do know is that interest rates are at historic lows, and much more likely to go higher than lower, over the longer term (when this happens is anybody’s guess).

If you need the money in the next few years, and can’t risk losing any of it, consider a mix of shorter-duration bonds/debt instruments. Mostly Treasuries, some “teaser rate” CDs, savings, or money market deposit accounts (only accounts covered by FDIC). You can consider investing a (smaller, IMHO) portion of this money in some shorter-duration corporate and/or municipal bonds if they are highly-rated AND you do your own due diligence WRT credit risk, etc. Personally, I would not buy bonds with maturity dates more than 3 years out at this point, but that’s just me, and I’ve been wrong about the direction of interest rates in the past.

If you don’t expect to need the money any time in the near future, flu’s idea is also excellent. Just make sure that both sides understand the relationship (e.g. whether or not you’ll foreclose in the event of a default, etc.), and use formal documents to record the transaction.