The resuscitation of the housing market is fueling a boom in private equity real estate funds. Real estate funds accounted for the largest proportion of PE capital raised in the fourth quarter of 2012. And the biggest PE fund raised in 2012 was the Blackstone Group LP's (NYSE: BX) global real estate fund, Blackstone Real Estate Partners VII, which took home $13.3 billion and attracted 250 investors.

"We believe the current environment provides a highly attractive opportunity to generate favorable returns," said Jonathan Gray, when the fund was announced in October. The largest category of investor in the fund is U.S. public pension plans, according to Blackstone. Approximately 35 percent of the capital has already been committed or invested.

A lot of the credit for the success of the fund goes to Gray, a rising star within the firm. He came to Blackstone in 1992 straight out of the Wharton School of Business and joined its board of directors in early 2012. Considered a potential successor to president Hamilton ("Tony") James and CEO Stephen Schwarzman, Gray leads a group that manages more than $50 billion in equity. His group also generates more profits than any other unit of Blackstone, according to Forbes.

Gray has conducted some of the firm's biggest deals, including the $26 billion buyout of Hilton Worldwide in 2007 and the 2007 $39 billion deal for Equity Office Properties Trust. In May, Blackstone bought the Motel 6 chain from Accor SA for $1.9 billion.

"The recovery in house prices could surprise people," Gray said in a Bloomberg TV interview in November. "They have just gotten beaten down so much, and we're not building enough to keep up with the population growth. Affordability is there. I think as homeowners get a little bit of confidence, we will steadily have more people lean toward buying homes, faster home price appreciation, which will be good for this investment strategy and good for the economy at large."

The moment won't last long, though, warned Gray. The opportunity for funds to buy homes at discounts could last less than three years, he told Bloomberg.

In the meantime, Blackstone is far from alone in capitalizing on renewed interest in real estate. According to research house Preqin, real estate funds accounted for the largest proportion of capital raised of any private equity fund type during the fourth quarter of 2012. It was a quarter that saw 29 funds closing on a combined $22.6 billon.

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