UNITED STATES - RREEF, the real estate investment giant, is predicting the US residential market still has a substantial way to go before reaching its lowest point.

In its latest research report, entitled A Perspective on Residential Land Investment, RREEF notes there the market is unlikely to improve any time soon, and a strong indicator is supply of housing now outstrips demand.

"There is a perception that the market has not yet hit bottom.  The volume of sales is still declining," said Alan Billingsley, director for RREEF Research.

"It's our opinion that there are now two million more homes than there currently is demand for in the United States. This has created a two- to three-year excess supply of homes, that needs to be absorbed before the market can start the correction process," suggested Billingsley.

Some markets are distinctly worse off than others but those in the best shape are cities such as Austin, San Francisco, Seattle and Washington DC as these cities do not have a great amount of excess supply and it will therefore be hard to find residential lots at deeply discounted pricing.

The most compelling places for good opportunistic plays are in markets like Atlanta, Denver and Los Angeles, according to RREEF, as the existing supply will likely be absorbed over a 24- to 36-month period thanks to reasonable healthy employment and economic growth over that time frame.

That said, markets said to be worst off and already struggling are residential properties in Las Vegas, Miami and Phoenix and RREEF projects it will be three years before these markets fully recover.

RREEF notes many pension funds and other investor groups have created relationships to invest in residential land, including the likes of California State Teachers Retirement System (CalSTRS), Los Angeles County Employees Retirement Association (LACERA) and the endowment at Stanford University.

Despite this, the feeling, according to RREEF, is many investors are having discussions about placing capital into residential land investing and more relationships could be created in the future.