In time-domain subspace methods for identifying linear-time invariant dynamical systems, the model matrices are typically estimated from least squares, based on estimated Kalman filter state sequences and the observed outputs and/or inputs. It is well known that for an infinite amount of data, this least squares estimate of the system matrices is unbiased, when the system order is correctly estimated. However, for a finite amount of data, the obtained model may not be positive real, in which case the algorithm is not able to identify a valid stochastic model. In this note, positive realness is imposed by adding a regularization term to a least squares cost function in the subspace identification algorithm. The regularization term is the trace of a matrix which involves the dynamic system matrix and the output matrix.