Paulson Credit Opportunities Funds is having a house party of sorts. The New York-based hedge fund is already making money on its red-hot bet that the housing market in the Big Apple will continue to cool off. According to The New York Post, Paulson wrote investors in July that it intends the capitalize on the gloom over the former real estate boom, with the hopes that as things get worse for mortgagees unable to pay, returns will get even better for investors. In one month alone, Paulson, reports The Post, raised $147 million for its $1.8 billion leveraged bet that the first ones to feel the brunt of the downturn will be those with the worst credit. The strategy seems to be working so far, because in one month the hedge fund saw returns climb 2.87%, with plenty room for more growth. "Most housing trends continue to deteriorate," the firm wrote in its investor letter, pointing to lowest monthly house price increases in more than a decade and the large number of house inventory as signs of "declining fundamentals." Supporting its theory, Paulson attached to the investment letter an analysis from economist A. Gary Schilling, who wrote, "With [house price] appreciation evaporating, refinancing will dry up and foreclosures leap."