Kiesel, who predicted the home-price bubble would burst in 2006, is betting on an extended housing recovery with his investors’ money and his own. In May, six years after selling his last house near the real estate peak, Kiesel bought a Newport Beach home in a sign of his conviction that prices had bottomed. The Pimco Investment Grade Corporate Bond fund outperformed the broader Barclays US Credit index in 2012 because of its housing-related investments, he said.

“Residential investments potentially could grow between 20 percent and 30 percent” in 2013, adding as much as 0.75 percent to U.S. gross domestic product growth, he said.

The U.S. economy expanded at an annual pace of 3.1 percent in the third quarter, the Commerce Department said Dec. 20. Residential fixed investment climbed almost 14 percent from a year earlier to $370.9 billion, its highest level since the end of 2008. Gross domestic product will increase 2 percent this year, based on the median of 85 estimates in a Bloomberg survey.

U.S. payrolls rose by 155,000 workers last month following a revised 161,000 advance in November that was more than initially estimated, Labor Department figures showed today. The unemployment rate matched a four-year low, at 7.8 percent.

More Bullish

While new-home sales are at about a third of the level they were at the peak in 2005, builders are growing more bullish. The National Association of Home Builders/Wells Fargo Housing market index last month rose to its highest level since April 2006. The gauge, in which a number above 50 indicates more builders view sales conditions as good than poor, reached 47, compared with a low of 8 in January 2009.

The Standard & Poor’s Supercomposite Homebuilding Index jumped 84 percent last year, the best performance since 2003. PulteGroup Inc., the largest U.S. homebuilder by revenue, surged 188 percent for the biggest gain in the entire S&P 500.

Increases in home prices, construction employment and consumer optimism can restart the “virtuous circle,” shifting housing from an economic drag to an economic engine, according to Michael Widner, an analyst with Stifel Nicolaus & Co.

“We see 2013 as the year the housing story progresses from ‘no way’ to consensus, and the GDP and job growth tailwinds being sustainable through 2015,” Widner, based in Baltimore, wrote in a Dec. 19 note.

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