Hopes that plunging American residential property prices may soon start to bottom out were raised yesterday after one Manhattan-based real estate investor revealed plans to start spending its $1 billion (£504 million) investment portfolio in the next three to six months.

In an interview with The Times, Weis Group, a New York-based fund, said that it was in talks with a handful of America's biggest banks to acquire residential property that has been seized by lenders and is languishing on their books.

The move comes a week after Robert Shiller, Professor of Economics at Yale and co-founder of the S&P Case/Shiller house price index, said that declines in American property values could double before they start to recover. Prices have fallen by around 15 per cent over the past two years, he said, but losses could be greater than during the Great Depression, when values fell by 30 per cent.

Weis has spent the past two years earmarking key sites - typically vast, half-finished property projects such as gated communities in Southern states. The fund wants to complete these developments and sell them on in three to five years.

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Adam Weis, the chairman and chief executive, told The Times: “The properties we are looking to buy are not distressed in themselves - it is the market that is distressed. We are negotiating with the lenders who now have these properties on their books. In some cases, we are looking at buying the land at a 50 per cent discount to book value.”

Weis said that it had been approached by hedge funds to invest in distressed real estate over recent but had chosen to wait, taking the view that the market would fall further. Mr Weis believes that the American property market will bounce back in part because of the combined effect of a rising number of immigrants to the United States, first time buyers, and newly retired Americans. He added that within the next decade 78 million Americans were expected to retire and many would move to the warmer, Southern states.

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