On their surface, the latest foreclosure numbers from RealtyTrac look pretty good. Filings were down in the first quarter of this year to the lowest level seen since 2007, 2% lower than the previous quarter and down 16% year-over-year.

In March, foreclosures were down 4% from the previous month with 198,853 filings—the first time a monthly report has come in under 200,000 in almost five years, and an annual decline of 17%.

But the industry should still be waiting to exhale, said Brandon Moore, CEO at RealtyTrac, in a statement discussing the numbers. "The low foreclosure numbers in the first quarter are not an indication that the massive reservoir of distressed properties built up over the past few years has somehow miraculously evaporated. There are hairline cracks in the dam, evident in the sizable foreclosure activity increases in judicial foreclosure states over the past several months, along with an increase in foreclosure starts in many judicial and non-judicial states in March. The dam may not burst in the next 30 to 45 days, but it will eventually burst, and everyone downstream should be prepared for that to happen."

Indeed, first-time foreclosure starts, including default notices and scheduled foreclosure auctions, were up 7% in March from February, the third consecutive month to show an increase, with red hot activity in some states, including Nevada (up 153%), Utah (up 103%), and New Jersey (up 73%).

To read the full report, click here.

Claire Easley is a senior editor at Builder.

Learn more about markets featured in this article: Greenville, SC.