The would-be thief was arrested when he called police in the early hours of Wednesday to report his gruesome encounter in the North Island town of Hamilton, the New Zealand Herald reported.
Inspector Greg Nicholls said it was the most unusual case he had encountered in his 28-year police career, and he believed it would prompt the burglar to mend his ways.
"I'm hopeful that this might be a career-changing moment for that burglar," he told the newspaper.
"I dare say for the burglar, if we remove the criminality of what he was doing, it would be really shocking. Can you imagine what that would be like in the dark?"
Nicholls said the death of the man found hanging in the house would be investigated by a coroner.