Don't let this week's huge move in real estate stocks fool you into believing the real-estate recession is over. The professional bargain hunters are out in force, buying out companies on the way down before other private-equity firms snatch up the deals.

Tishman Speyer Properties LP and

Lehman Brothers Holdings

( LEH) sparked a rally in real estate investment trusts with a $13.5 billion agreement to buy

Archstone-Smith Trust

( ASN). With the prospect of apartment rents rising 6% or more in 2007, the ability to acquire a block of 86,000 in one purchase was too good to pass up.

Also on the takeover list is

Pennsylvania Real Estate Investment Trust

(PEI) - Get Report

. A minor shareholder, London-based LaSalle Investment Management, reportedly offered $55 a share for the company.

Excluding two funds that short the sector, the potential for REITs to be bought out by private-equity firms sent the average real estate fund we track up 5.57% for the week ended Thursday, May 31.

The two funds leveraged to the Dow Jones U.S. Real Estate Index,

Ultra Real Estate ProShares

(URE) - Get Report


(REPSX) - Get Report

ProFunds Real Estate UltraSector ProFund (REPSX) jumped an earth-shattering 13.31% and 9.90%, respectively.

The ProFunds Real Estate UltraSector ProFund is allocated to 90.3% REITs, 5.6% real estate, 3.6% forest and paper products and 0.5% diversified financial services. It has large holdings of

Simon Property Group

(SPG) - Get Report


Equity Residential

(EQR) - Get Report



(PLD) - Get Report


The biggest moves over the four trading days were Archstone-Smith Trust, up 20.67%,

Highwoods Properties

(HIW) - Get Report

up 13.05%,

AvalonBay Communities

(AVB) - Get Report

up 12.66% and

Pennsylvania Real Estate Investment Trust

(PEI) - Get Report

up 11.62%.

Investors who followed the private-equity smart money sent the REITs soaring and crushed the two funds negatively leveraged to these stocks.

UltraShort Real Estate ProShares

(SRS) - Get Report

dove 11.65%, while

(SRPIX) - Get Report

ProFunds Short Real Estate ProFund (SRPIX) felt the pain of a 6.26% slide.

Not participating in this week's rally are the homebuilders. Backtracking a little, the

iShares Dow Jones US Home Construction Index Fund

(ITB) - Get Report

slipped 0.80%. Its largest holdings include

Lennar Corp.

(LEN) - Get Report


NVR Inc.

(NVR) - Get Report


KB Home

(KBH) - Get Report

with the largest declines going to

M/I Homes'

(MHO) - Get Report

4.16% drop, a 2.86% decline in NVR and a 2.67% loss in

Skyline Corp.

(SKY) - Get Report


This week, NVR experienced selling from three insiders. Also,

Pulte Homes

(PHM) - Get Report

trimmed 0.98% from its stock and 16% from its employee base in an announcement of another 1,800 layoffs.

U.S. Treasury Secretary Henry Paulson may have declared the demand slump in housing to be over, but whether he's right remains to be seen. Bank lending standards are still restrictive and as many as 50 subprime lenders are out of business. This accounts for the sub-par performance of the

(FSVLX) - Get Report

Fidelity Select Home Finance Portfolio (FSVLX).

The fund is 31.5% invested in diversified financial services, 27.6% in savings and loans, 16.5% in banks, 16.1% in insurance, 2.6% in REITs and 1.6% in software.

Countrywide Financial

( CFC), which represents 11.5% of the fund, fell 2.65% for the period. The biggest fall was the 9.94% drubbing of

Clayton Holdings

( clay) -- a result of a negative outlook for its mortgage securitization surveillance service.

Buyers still believe that if they wait a little longer, prices may come down further. Until this mind-set changes, the real-estate recession will continue. So, selling individual homes one at a time is still tough. But, if you have a company that owns several thousand homes filled with renters, your chances of making a bulk sale have improved.

Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by, 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.