When an asset price falls, investors must be careful of being sucked into losing heavily from buying into a "value trap" as opposed to profiting from a "value play. As timely examples, Sears Holding (NASDAQ: SHLD) and J.C. Penney (NYSE: JCP) appear to be classic value traps.Chicago value play, real estate investing  On a price-to-sales and price-to-book ratio, the stocks for each are trading at a deep discount.

 But the share price for each is plunging: over the past year Sears has fallen more than 15%.  For just the last week of market action alone, Sears is down more than 6% as it reported disappointing earnings.  

A very bearish sign for Sears is the number of investors betting the will fall even more through opening a short position on the stock.  That entails borrowing stock in the hopes the price will fall so it can be replaced at a lower price.  A short position of 5% is considered to be troubling for a company.  The short position on Sears Holding is 9.96%.

It is no better at J.C. Penney.

J.C. Penney is down more than 37% for the last year.  Over the last week it has plunged almost 10%.  There is a short position of 18.92% for J.C. Penney.  

Any investor buying shares of either company would probably be getting involved in a classic value trap, being enticed by the low prices of the seemingly undervalued asset.  A value play, however, was when Wal-Mart (NYSE: WMT) fell due to issues with its operations in Mexico.  Due to concerns, Wal-Mart fell into the 50s.  Savvy investors like Warren Buffett, considered by many to be best of all time, swooped in to buy, regarding Wal-Mart as a value play.  Wal-Mart is now trading in the mid-70s, up more than 16% for the last year.  

The short position on Wal-Mart is a miniscule 1.68%.

It is no different in real estate.  In a recent article by Jed Kolko, the chief economist for Trulia, the research firm, he claimed that Detroit was one of the most undervalued markets in the country.  In his piece, "Rebound, not Bubble: Home Prices Still Undervalued," he wrote that, "Prices are most undervalued today in Las Vegas and Detroit, even after their price gains in the past year."

Detroit is a value trap.  Chicago is a value play in real estate.  

In a recent study, Detroit was rated the most crime ridden city in the United States.  As written about the research findings, " Detroit has long been one of America's most crime-ridden cities, and low unemployment has made it worse with 1,111 violent crimes per 100,000 residents."  Under the control of an emergency manager, The Detroit Free Press reports that the city is confronted with the possibility of bankruptcy. There are 45,000 vacant houses in Detroit, according to an article in Mother Jones magazine.  In terms of supply and demand for those who want to live in Detroit and rent or buy a home, the Daily Mail Reporter reports that the city has lost 60 percent of its population since the 1960s.

Make no mistake about it: real estate in Detroit is a classic value trap as the prices are so low for the simple reason few want to buy any property in the beleaguered city....45,000 vacant houses is testament to that fact!

Chicago, by contrast, is the second most popular city in the country for recent college graduates, wrote Sean McMinn recently in USA Today.  In his May 15, 2013 USA Today piece, "Bright Lights, big cities win new grads," there was a 27% increase in the number of college graduates heading to Chicago from the year 2006, it was reported.  Detroit came in 95th, with a decline in the number of college graduates heading its way.  With so many young people moving to Chicago, there is certainly no surprise that its real estate prices are up sharply and should continue in that direction making properties there a classic value play.