Home Inventories Fall, but Foreclosures Rise (Update2)

Updated from 10:22 a.m. EDT

June new-home sales came in higher than expected but remained at very depressed levels.

The positive sign for the housing market is that new-home inventories are falling. The bad news is that foreclosure filings are rising.

New home sales totaled an annual rate of 530,000 in June, which was 0.6% below the revised May rate and 33.2% below a year earlier, the Census Bureau said Friday.

Economists expected 505,000, according to Briefing.com.

The raw inventory level fell once again to 426,000 units, down from 450,000 in May and 543,000 in June 2007. The June inventory number represents 10 months of supply at the current sales rate.

This was the largest monthly inventory decline since the data collection began in 1961, according to Wachovia. "While we are not ready to call a bottom this is certainly a positive sign," Wachovia economic analyst Adam York said in a research note.

Meanwhile, a separate report Friday showed foreclosures across the U.S. rose sharply in the second quarter. Foreclosure filings totaled 739,714, up 14% from the first quarter and 121% from a year earlier, according to data from RealtyTrac.

One in every 171 U.S. households received a foreclosure filing in the quarter, the report said.

Nevada, California and Arizona have the highest foreclosures. The cities of Stockton and Riverside-San Bernardino, both in California, took the No. 1 and No. 2 spots. Las Vegas came in third.

Homebuilder stocks erased their early losses after the new-homes sales report came out. The SPDR S&P Homebuilders ETF (XHB Quote) was trading up 3.3% at $17.46. Pulte Homes (PHM Quote) surged 6.6% to $11.76, Centex (CTX Quote) rose 5.9% to $13.69, but Ryland (RYL Quote) was trading down 0.6% to $21.30.