A 34 percent plunge in commercial real estate prices has driven New York's Blackstone Group, LP, to change its business strategy and delve into the residential property market.

Blackstone, a private equity firm, has already spent more than $250 million on foreclosed single-family homes, according to the New York Times. Although the company is mum on its new direction, anonymous sources close to Blackstone told the Times that the buying spree could be a prerequisite to forming a real estate investment trust possibly to be taken public later.

The company and its affiliated partners have purchased 1,500 houses around Phoenix and Southern California, according to the sources who say it will target Northern California, Florida, and Georgia, markets known for their overwhelming inventory of residential foreclosures.

Blackstone spokesman Peter Rose declined to provide comment to the paper.