Foreclosure filings, the industry’s largest variable in achieving a housing recovery, saw a 1% increase across the nation in January from the month before. The number, which includes default notices, scheduled auctions, and bank repossessions, came in at 261,333, or one in every 497 housing units, a 17% decrease year-over-year, according to numbers released today by RealtyTrac.

While noting that January represented the third month in a row in which fewer than 300,000 foreclosure filings were received—a welcome change after 20 straight months of filings exceeding 300,000—RealtyTrac’s CEO James Saccacio warned against being too optimistic. “Unfortunately this is less a sign of a robust housing recovery and more a sign that lenders have become bogged down in reviewing procedures, resubmitting paperwork, and formulating legal arguments related to accusations of improper foreclosure processing.”

Among foreclosure filings, 75,198 were default notices in January, down 1% from December and down 27% from the previous year to reach the lowest month for default notices since July 2007.

Foreclosure auctions accounted for 108,002 filings in January, a 4% decrease from the previous month and a 13% decrease from the previous year. And lenders foreclosed on 78,133 properties during the month, an increase of 12% from December and 11% below January 2010.

Nevada continued to see the worst rate in the nation for the 49th straight month, with one in every 93 housing units receiving a foreclosure filing in January, a rate of more than five times the national average. Bank repossessions increased 16% from the previous month, while default notices and scheduled auctions saw month-over-month declines.

Arizona took the No. 2 spot with a rate of one in every 175 units receiving a filing in January. The 54% increase in REOs from December drove total foreclosure activity up 16% for the month. Even so, the state’s filings stayed 25% below their position in January 2010.

California rounded out the top three, at a rate of one in every 200 homes receiving a filing. REO activity in the Golden State was up 32% from the previous month.

Overall, five states accounted for more than 50% of the nation’s foreclosure filings last month, with California's 67,072 filings claiming 25% of January’s total. While Florida’s activity decreased to a 42-month low in January, it still registered as second highest in the nation for shear numbers with 21,671. Michigan, Arizona, and Texas also posted in the top five nationwide.

Although Las Vegas led the country’s metro areas with one in every 82 housing units having received a filing in January, California posted seven of the top 10 highest foreclosing metro areas, with Modesto coming in at No. 2 with one in every 111 units having received a foreclosure filing in January.

In a recent interview with BiggerPockets, Rick Sharga, vice president at RealtyTrac, reported that there are 300,000 bank-owned properties on the market, another 700,000 on banks' books but unlisted, a million properties in foreclosure, and an additional 5 million homeowners in serious delinquency on their loans.

“Unfortunately, we are very likely to set yet another record this year, in 2011,” Sharga said. “We think that the number of bank repossessions could go up by as much as 20% this year, and overall foreclosure activity will probably go up by a similar amount.”

Claire Easley is senior editor, online, at Builder.

Learn more about markets featured in this article: Las Vegas, NV, Modesto, CA, Greenville, SC.