Some 55,775 homes entered the foreclosure process last month, a decline of 8 percent from July and down 44 percent from August last year, foreclosure listing firm RealtyTrac Inc. said Thursday.
The national slowdown in foreclosure starts reflects an improving housing market, steady job growth and fewer troubled loans dating back to the pre-housing bubble days.
While the risk of foreclosure remains elevated in several states, including Florida, Nevada and Ohio, the pace of homes starting on the foreclosure path has been declining nationally in concert with the housing market rebound.
At their current pace, RealtyTrac expects monthly foreclosure starts to fall to around 52,000 a month early next year. That's the pace the company considers normal.
"We're not quite there, but almost there," said Daren Blomquist, a vice president at RealtyTrac.
Foreclosure starts fell on an annual basis last month in 38 states, including Colorado, Arizona, Washington and California. They increased on a monthly basis in 17 states, including Nevada, Ohio and New York, the firm said.
All told, foreclosure starts have declined on an annual basis the past 13 months, aided by rising home values, which make it easier for homeowners who may have been in negative equity, or owed more than their home was worth, to refinance or sell their home.
Some 7.1 million homes, or 14.5 percent of all U.S. homes with a mortgage, were in negative equity at the end of the second quarter, according to data provider CoreLogic. That's down from 9.6 million, or 19.7 percent of homes with a mortgage, in the previous three months.
Through the first half of this year, nearly 3.5 million homeowners have returned to positive equity, CoreLogic said.
While fewer homes are entering the foreclosure process, lenders have stepped up home repossessions in recent months.
Completed foreclosures rose 6 percent last month versus July, the third monthly increase in four months.
Much of the increase came about in states where courts oversee the foreclosure process. Those courts were backed up with cases two years ago, but have been making progress working through their backlog.
The number of homes taken back by banks last month climbed on an annual basis in 23 states, including New York, Florida and New Jersey, but was down 25 percent nationally, RealtyTrac said.
As Aug. 31, there were about 1.3 million homes in some stage of foreclosure or owned by banks, down about 5 percent from a year earlier.
Completed foreclosures are now on track to finish the year at 490,000, down about 26 percent from 2012's total, Blomquist said.
Foreclosures peaked in 2010 at 1.05 million and have been declining ever since. The trend has been accelerating as U.S. home prices have increased and the job market has improved.
Blomquist expects foreclosures nationally will reach a normal level around the first quarter of 2015.
It could take a bit longer in states like Nevada, which topped the nation last month with a foreclosure rate of more than two and a half times the national average.
RealtyTrac measures foreclosure rate by tallying the number of homes that receive a foreclosure-related filing, such as an initial default notices or a notice of scheduled auction.
Florida clocked in last month with the second-highest foreclosure rate in the nation, followed by Ohio, Maryland and Delaware to round out the top five.