"It's looking really good that there are not more coming into the pipeline," said Daren Blomquist, a vice president at RealtyTrac. "Barring any other economic shock to the system, we expect that to bode well going forward."
Foreclosure starts fell on an annual basis in the third quarter in 38 states, including Colorado, Arizona, California, and Illinois. They increased from a year earlier in 11 states, including Maryland, Oregon, New Jersey, and Connecticut.
While fewer homes are entering the foreclosure process, lenders stepped up home repossessions, which led to a quarterly increase in homes lost to foreclosure.
Completed foreclosures rose 7 percent in the third quarter versus the April-June period, the firm said. Completed foreclosures were down 24 percent from the third quarter last year, however.
All told, 119,485 homes were taken back by lenders in the July-September quarter. That puts the nation on pace to end this year with roughly 507,497 completed foreclosures, or down about 24 percent from 2012's total.
Foreclosures peaked in 2010 at 1.05 million and have been declining ever since.
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The number of homes taken back by banks in the third quarter climbed from the previous quarter in 26 states, including New York, New Jersey, Illinois and Virginia, RealtyTrac said.
Much of the quarterly increase in foreclosures 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.
Even so, it's taking longer for homes in many states to complete the foreclosure process.
In the third quarter, it took an average of 551 days, or 1.5 years, for a U.S. home to move from initial default status to ultimately being repossessed by the lender, the firm said.
That's up from an average of 526 days in the second quarter and an increase from 382 days in the third quarter of last year.
"It's a sign that we're still dealing with the wreckage of the last housing bust," Blomquist said.
In New York, it took an average of 1,037 days, or nearly three years, for the foreclosure process to run its course in the third quarter, the longest of any state. Maine clocked the shortest average time to foreclose at 160 days.
The impact of foreclosures remains sharply elevated in some states.
Florida topped the nation with a foreclosure rate of more than twice the national average in the third quarter.
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Rounding out the top 10 states with the highest foreclosure rates in the July-September period were: Nevada, Maryland, Illinois, Ohio, Connecticut, Delaware, New Jersey, Indiana, and South Carolina.
—By The Associated Press