Nevada still posted the highest foreclosure rate, with one in every 198 households receiving a filing, despite an 8 percent drop in foreclosure activity. Nevada is a non-judicial foreclosure state, so the foreclosure backlog has been clearing for the last several months.

The situation is the same in California, where foreclosure activity dropped to a 50-month low, but the state still posted the second highest foreclosure rate in the nation. More than 51,000 borrowers received a foreclosure filing in January. California cities still account for nine of the top ten metro foreclosure rates, according to RealtyTrac.

As optimism seems to abound for the spring, at least among the nation's home builders whose sentiment index jumped to the highest level in four years this month, foreclosures still stand in the way of a robust recovery.

Distressed property sales lower the value of homes around them, and that pushes more borrowers into a negative equity position, owing more on their mortgages than their homes are currently valued. Until banks work through the enormous backlog of foreclosures, which number in the millions, home prices will not hit a firm bottom, especially in the most troubled local real estate markets.

Questions? Comments? RealtyCheck@cnbc.com

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