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TORONTO (Reuters) - Well-heeled North Americans are starting to look more closely at an asset class that until recently was the pariah of the investment world: residential real estate in the United States.
With housing prices in many U.S. cities at multi-year lows, and with economic fundamentals picking up and interest rates still favorable, more investors are looking to put their cash to work by investing in second or even a third home.
Advisers warn, however, that a U.S. real estate recovery could be years off but see plenty of deals for people with long-term investment horizons.
"We're starting to get a lot more inquiries and assisting in transactions," said Rocco Papandrea, a senior vice-president and wealth management adviser at Merrill Lynch in New York.
Papandrea, who manages around $500 million in assets for 167 clients said he's seeing a lot of interest in properties on the West Coast and in Colorado, with Florida also on buyers' radar.
Prices for single-family U.S. homes fell by 3.1 percent in January over the previous year, the seventh-straight month of declines, according to the S&P/Case-Shiller composite index of 20 metropolitan areas.
Over the past four years, U.S. house prices have dropped an average 30 percent, and discounts are even higher in many of the destinations popular with "snowbird" retirees buying vacation homes in the U.S. Sunbelt.
Prices are down 44 percent in Tampa, 54 percent in Phoenix, 57 percent in Las Vegas, and 49 percent in Miami, according to Bank of Montreal, which estimates that one in five Canadians would consider buying U.S. property.
"The overall sense is that people are going to be looking hard," said Laura Parsons, a mortgage specialist at BMO in Calgary, Alberta.
The bank said Canadian buyers' appetites have been stoked by the strong Canadian dollar and expectations that U.S. home prices will gradually rise. But Parsons cautioned that investors should not expect to quickly cash in with flip sales.
"It's not a short-term investment," she said. "A rebound will take a long time."
Dean Frankel, a portfolio manager at Urdang Capital Markets in Plymouth Meeting, Pennsylvania, who oversees around $1.7 billion in real estate equity investments, said he sees compelling arguments to act now, if selectively.
"I don't see replacement costs really getting any better," he said, using a real-estate term for what it would cost to build a residence from the ground up. "In fact I think it's only going one way."
Frankel works primarily with large pension funds looking to invest in commercial real estate, but says the market is also ripe for high net worth investors -- directly or through real estate investment trusts and real estate funds.
He's particularly bullish on apartments, forecasting that rents will move higher as the U.S. economy improves.
"If the economy keeps clicking along and jobs keep growing, housing will be fine," he said, adding that it could take three to five years for a market rebound.
Reporting by John McCrank; editing by Rob Wilson