House prices in the U.S. are showing fresh signs of improvement, and market-watchers say the window of opportunity could be closing for bargain-hunting Canadians eyeing potential investment or getaway properties.

As economic collapses go, the U.S. housing implosion ranks among the very biggest. As many as four million families lost their homes in a foreclosure crisis that began to unfold in 2007.

From peak to trough, the average U.S. home lost more than a third of its value. Prices plunged so much that millions of Americans found themselves "underwater" – owing more on their homes than their homes were worth.

Now, after five years of U.S. housing pain, there are tentative signs that the worst may be over. Home prices in many cities have begun to rebound, inventory has begun to drop, sales in many of the worst-hit areas are rising, and building permits have jumped as once-moribund builders respond to growing demand.

In May, U.S. home prices rose an average of 2.2 per cent, the second consecutive month of cross-country growth, according to the S&P Case-Shiller 20-city home price index. The biggest gains in May were in San Francisco (3.9 per cent), Chicago (4.5 per cent) and Atlanta (4 per cent).

Canadian buyers

Nowhere has the long-awaited recovery been more noticeable than in Arizona and Florida – two states that were hit especially hard by the housing bust. They're also the two states where Canadian buyers have been particularly active.

As the U.S. market tanked over the past couple of years, some Canadian buyers took advantage of an especially fortuitous confluence of events — a dollar that had moved up to par, deeply-discounted asking prices, and little competition from an economically battered U.S. populace.

Many Canadians who bought in the U.S. even a few months ago are starting to see a return on the investment, but those who are still contemplating a purchase need to tread carefully. The bottom line? Realtors CBC News spoke to say last year's bargain-basement prices can't be had these days.

"The market has changed dramatically," says Diane Olson, a former Winnipeg resident who sells real estate in the Phoenix area through United Brokers Group. Her clientele is almost exclusively Canadian and mainly from Manitoba west.

Phoenix is one of the hottest real estate markets in the U.S., posting an average house price increase of 11.5 per cent between January and the end of July this year, according to S&P/Case-Shiller, although prices remain far below peak levels.

"It feels like we're back to 2004 to 2006 in terms of sales activity," Olson says, noting that it's not uncommon for good properties now to attract five to 10 bids. Low-ball offers, it appears, are so last year.

Cash is king

Some of those multiple bids are actually coming from other Canadians. It's still extremely difficult for all but the most credit-worthy Americans to get financing, so Canadians who can make all-cash offers – as most Canadian buyers do – still have a big advantage.

Since Canadian real estate prices have not collapsed the way they did in the U.S., home equity lines of credit are frequent sources of that cash.

Olson says a Phoenix property that may have sold for $265,000 US at the height of the American real estate boom in 2006, for example, might have seen its value crater to as little as $100,000 in late 2010 and into 2011. Now, buyers can expect to pay $125,000 to $150,000 for that same home – still a bargain compared to its peak price, but not the deal it once was.

Despite that price rebound, Olson says she's still seeing a lot of interest from Canadians for both investment and vacation properties.

"I'm still on track with the same sales numbers," as last year or two years ago, she says, and seminars she gives north of the border about buying U.S. real estate are still well attended.

Florida prices recovering

The real estate picture is much the same in Florida, also a favourite sun destination for Canadians.

Prices in some areas like Miami plunged more than 50 per cent from peak to trough. Since last winter's bottom, prices in many Florida cities have recovered by about 10 per cent, says Wayne Levy, director of marketing for Florida Home Finders of Canada, a Vaughan, Ont.-based brokerage firm that markets properties exclusively to Canadians.

Levy says part of his job when he leads seminars for potential clients is to manage expectations of Canadians who've heard about the U.S. housing bust and think they can buy premium properties on the cheap.

"If you think you're going to find something on the water for $100,000 to $200,000, I've just saved you $500 in airfare," he says. "That just doesn't exist."

But Levy says it's not difficult for Canadians to find good low-rise condo developments a few minutes inland in the $75,000 to $150,000 range at the moment.

"The best deals are on the west coast [of Florida]," he says, listing Fort Myers, Sarasota, Tampa and Orlando as being cheaper than Florida's east coast.

Levy says the recent price gains don't seem to have dampened the buying interest from Canadians, suggesting that the upturn may have actually reassured buyers that the market has indeed bottomed and is in recovery mode.

"I think a lot of people were waiting for good news before they were willing to pull the trigger," he says.

Figures from the U.S. National Association of Realtors confirm that Canadians' appetite for U.S. real estate has been growing. Its most recent survey, released in June, found that 24 per cent of international U.S. real estate sales were to Canadians, more than double the rate in 2007.

Slow recovery

But even as buying conditions for Canadians remain favourable – record low interest rates, prices still well below peak levels, the loonie near par – there are economists who expect that future price gains in U.S. real estate may be modest.

Uncertainty still remains in the U.S. market for a number of reasons:

• Banks are holding back inventories of foreclosed homes so as not to flood the market.
• American incomes aren't rising.
• Unemployment remains high.
• Consumer confidence remains low.

And financial advisers caution that any decision to buy should be based on more than price alone — especially if it's a rental property.

"There's also the nuisance factor," says Terry Ritchie, a Calgary-based financial planner with Transition Financial Advisors Inc. and co-author of The Canadian in America.

"You're here, the property is there. You need to find a good property manager – someone good who's minding the store," he tells CBCNews.ca.

"That has to be part of the calculation."

While the U.S. housing market numbers are improving, nobody is sure where the economy will go in the coming months. To avoid the potential pitfalls of buying real estate in the U.S., experts advise Canadians to look beyond the price tag, to do their due diligence, allow for some what-ifs, and accept that all investing carries risk.