The pace of new home sales fell again in June, but the annual rate was much better than economists predicted.

The U.S. Census bureau reported that June sales of new single-family homes fell 0.6 percent from May to a seasonally-adjusted rate of 530,000. Economists had predicted that June sales would come in at 505,000.

Still, new home sales were an anemic 33.2 percent below last year’s levels.

In the South, sales declined 2.0 percent from May and were down 34.9 percent from June 2007.

The inventory of new homes on the market also declined 3.8 percent from May with ten-months’ worth of inventory currently for sale. The supply of new homes, though, is still 20.5 percent above last year.

It certainly appears as if the builders may have hit bottom: they’ve drastically reduced prices to the point where they cannot really be cut any more, they’ve reduced new home starts, and they’re working on reducing excess inventory. Unfortunately, while this may be a bottom, there is very little indication that things will get any better any time soon, and it is much more likely that they will continue to languish at these levels until there is a broader recovery in the housing market.

With the number of foreclosures swelling and the number of existing homes for sale increasing, that broader recovery is still probably some time off.

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Can’t tread water, originally uploaded by lowefidelity.