Pensions file
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Kai Ryssdal: It's not just wannabe homebuyers who're keeping an anxious eye on the real estate market. Housing's an opportunity for a whole lotta buyers right now, including state pension funds.

They cover health care and retirement benefits for millions of public employees across the country. They lost billions when subprimes hit and the market collapsed, but now they smell bargain and they're getting back into the game.

Stacey Vanek Smith has the story.

Stacey Vanek Smith: States like South Carolina and Pennsylvania think it's time to start real estate shopping. Maryland plans to double its real estate investments over the next couple years.

John Greenberg is the investment strategist for Maryland's pension fund. He says it's time to buy.

John Greenberg: It's always better to buy something that's in some distress. You can buy things at the discount.

Greenberg says Real Estate Investment Trusts, mortgage-backed debt and international real estate investments will make up about 10 percent of Maryland's $37.5 billion fund. Greenberg says states can't afford to play it too safe right now.

Greenberg: We all have a return that we have to hit in order to pay our benefits and right now, bond yields are so low, we can't really hit those return targets. So what a lot of states are doing is they're taking a lot of the money that would be in bonds and shifting it over to other asset classes and one of those asset classes is real estate.

But while these are far from subprime investments, states need to take it slow says Nicolas Retsinas, director of the Joint Center for Housing Studies at Harvard.

Nicolas Retsinas: At this point in the market, while prices are continuing to decline. you want to be careful you don't sort of overly anticipate and get ahead of it.

But Retsinas says there are clearly bargains to be had.

Retsinas: While we don't know, you know, what are the right prices for some of these assets, whether it be real estate or mortgage backed securities, right now the valuation has been discounted by what I call the fear factor.

Retsinas says 2008 will likely be another rough year for the housing market, but, he says when it comes, the recovery could happen fast.

In Los Angeles, I'm Stacey Vanek Smith for Marketplace.

Follow Stacey Vanek Smith at @svaneksmith