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Despite housing slump Pimco remains bullish on the sector

PIMCO headquarters in Newport Beach, California
Scott Mlyn | CNBC
PIMCO headquarters in Newport Beach, California

New U.S. single-family home sales fell 6.8 percent in June to their lowest level in seven months and May's sales were revised sharply lower.

But Friday's data did not appear to dampen investor belief the housing market remains on solid ground.

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Bond giant Pimco expects housing starts to grow over ten percent over the next three years, due to improving labor market and low inventories.

"We remain bullish on U.S. housing, given improving labor market and the U.S. consumer," said Mark Kiesel, Pimco chief investment officer of global credit, in a "Power Lunch" interview on CNBC Friday.

Kiesel oversees $364 billion in assets for Pimco, the world's largest bond fund, with a total $1.59 trillion in assets under management as of March 31, 2015.

Pimco's investment strategy is to be overweight and long on the U.S. housing sector, favoring credit markets, specifically cyclicals and non agency mortgage-backed securities.

Housing and housing-related sectors Kiesel favors now include home improvement distributor and manufacturer, USG, title insurance issuer First American Financial and building material maker Masco.

Kiesel also likes the homebuilders, Toll Brothers, DR Horton and KB Home.

"Inventories are low," said Kiesel. "Household formation is expected to pick up, the labor market is improving with pent-up demand and improving credit, and households are in a position to re-lever."