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TheStreet.com Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis.

NEW YORK (

TheStreet

) -- U.S. existing-home sales grew 7.2% in July from June, with new-home sales adding 9.6% for the same period, according to the National Association of Realtors. Buyers are coming out of the woodwork to compete for low-priced foreclosure sales.

The ensuing rally pushed the average real estate fund we track up 4.1% for the week ending Thursday, Aug. 27. This gain excludes the inverse funds that sell short the real estate stocks.

First-time home buyer credits and low interest rates are keeping the real estate recovery on track. The S&P/Case-Shiller home-price index advanced 2.9% during the second quarter. Prospective buyers and real estate investors are betting the U.S. real estate market has hit its low.

Encouraging data boosted two exchange traded funds that invest in homebuyers. The

iShares Dow Jones U.S. Home Construction Index Fund

(ITB) - Get iShares U.S. Home Construction ETF Report

and the

SPDR S&P Homebuilders ETF

(XHB) - Get SPDR S&P Homebuilders ETF Report

were among the 10 best performing real estate funds, rising 7.2% and 6.8%, respectively.

The iShares ETF's top performing holding is

Ethan Allen Interiors

(ETH) - Get Ethan Allen Interiors Inc. Report

TheStreet Recommends

, which has gained 19% on cost cutting measures. Insulation giant

Owens Corning

(OC) - Get Owens Corning Report

added 9% on the strength of its roofing division and its pledge to cut spending.

Homebuilders also had a strong week, with

M/I Homes

(MHO) - Get M/I Homes, Inc. Report

up 13%,

Standard Pacific

(SPF)

up 12%,

D.R. Horton

(DHI) - Get D.R. Horton, Inc. Report

up 11%, and

Lennar

(LEN) - Get Lennar Corporation Class A Report

up 9%.

The best performing fund, the

Direxion Daily Real Estate Bull 3X Shares ETF

(DRN) - Get Direxion Daily Real Estate Bull 3x Shares Report

, is 300% leveraged to the daily performance of the MSCI US REIT Index. The fund rose 15% in the five trading days under review. Gains of 44% in

Gramercy Capital

( GKK), 18% in

Strategic Hotels & Resorts

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and 17% in

FelCor Lodging Trust

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were among real estate investment trust movers.

Three inverse funds that short the sector with 100%, 200% and 300% negative leverage were among the losing funds. The

ProFunds Short Real Estate ProFund

(SRPIX) - Get ProFunds Short Real Estate Inv Report

declined 4.2%, while the

ProShares UltraShort Real Estate ETF

(SRS) - Get ProShares UltraShort Real Estate Report

fell 7.8% and the

Direxion Daily Real Estate Bear 3x Shares

(DRV) - Get Direxion Daily MSCI Real Estate Bear 3X Shares Report

slid 13%.

The

Claymore/AlphaShares China Real Estate ETF

(TAO) - Get Invesco China Real Estate ETF Report

was the only other losing fund, off 1.5%. The fund is pulling back as investors sell holdings in the Hong Kong and mainland Chinese property markets, which have performed well this year.

For more information, check out an

explanation of our ratings

.

-- Reported by Kevin Baker in Jupiter, Fla.

.

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Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by TheStreet.com, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.