As a greater number of households managed to stay on top of their mortgage payments, foreclosure activity declined significantly in the month of September.
During the month, there were 180,427 foreclosures, according to a report from RealtyTrac. While this may still seem like a large amount, it was a 7 percent decline from August and a 16 percent drop from September 2011.
"We've been waiting for the other foreclosure shoe to drop since late 2010, when questionable foreclosure practices slowed activity to a crawl in many areas, but that other shoe is instead being carefully lowered to the floor and therefore making little noise in the housing market - at least at a national level," said RealtyTrac vice president Daren Blomquist.
Foreclosure activity in the third quarter also plummeted, falling to a five-year low, the report said. During the three-month period, there was a total of 531,576 filings, marking a 13 percent dip from a year earlier and nine straight quarters of improvements.
States paint different pictures
Falling activity in a handful of states that once accounted for a significant portion of foreclosure activity played a major role the the overall decline.
In the wake of the real estate bubble burst, Arizona, California, Georgia, Michigan and Texas had some of the highest home repossession rates in the country. In the third quarter, foreclosure inventory levels in these areas thinned significantly, contributing to the national change. Property data shows the supply in California was nearly cut in half from a year earlier.
However, not every state experienced improvement during the three-month period. Florida, Illinois, Ohio, New Jersey and New York accounted for the largest quarter-over-quarter gains.
Judicial versus non-judicial states
When it comes to foreclosures, there are two different proceedings states use to complete the process. Nearly half utilize local court systems (judiciary), while the remainder settle the transactions directly between borrowers and lenders (non-judicial).
During the third quarter, there was a 20 percent drop in filings in states which have non-judicial foreclosure processes, the report said. Meanwhile, judicial states reported a 14 percent increase in activity, although proceedings often took much longer to complete.