The rate of U.S. home foreclosures plunged sharply over the past year, adding to signs of an improving housing market and supporting homebuilder exchange traded funds.

The SPDR S&P Homebuilders ETF (NYSEArca: XHB) gained 2.8% Tuesday and iShares U.S. Home Construction ETF (NYSEArca: ITB) rose 3.9%. Year-to-date, XHB increased 10.0% and ITB added 2.4%. [Homebuilder ETFs Strengthen as Sentiment Hits 7-Year High]

According to CoreLogic, over 50,000 foreclosures were completed in May, down 27% year-over-year but up 3.5% from April, reports Ruth Mantell for MarketWatch.

“We continue to see a sharp drop in foreclosures around the country and with it a decrease in the size of the shadow inventory,” Anand Nallathambi, president and CEO of CoreLogic, said in a press release. “Affordability, despite the rise in home prices over the past year, and consumer confidence are big contributors to these positive trends. We are particularly encouraged by the broad- based nature of the housing market recovery so far in 2013.” [Builder ETFs Higher on New Home Sales, House Prices]

Nevertheless, this is still above the monthly average of completed foreclosures prior to the financial crisis – between 2000 and 2006, the monthly average was 21,000.

Additionally, CoreLogic reveals that about 1 million U.S. homes were at some stage of foreclosure in May, down 29% year-over-year and down 3.3% month-over-month.

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