The highest percentage of foreclosure sales took place in California, Nevada and Arizona. In the South Bay, roughly 40 percent of all home sales were foreclosed properties.
Steve Dutra put new tile in, a new toilet and more in his new home. He admits it is not his dream house and was nearly condemned at one point.
"Most of the houses I was looking at were foreclosed homes because they were the more affordable homes," says Dutra.
According to RealtyTrac, of the 60,000 houses sold in the first part of the year in California, 51 percent were foreclosures. That's a drop from last year, when 70 percent of home sales were foreclosed properties.
"I think we still have a long ways to go. I think this is kind of a false sense of security for the moment because we know the default activity is still very, very strong," says Mike Bell, a foreclosure realtor.
"Our average price is decent, $495,000," says Bell.
Bell thinks loan modifications have helped slow down the foreclosure rate, but according to those facing foreclosure, there's still not enough help.
On Thursday, hundreds of home owners gathered in San Jose to criticize the Home Affordable Modification Program, or HAMP. That's the federal plan to give banks incentives to work with homeowners in trouble.
"The latest HAMP numbers showed about 350,000 permanent loan modifications, but meanwhile there's been 5 million foreclosures over the last two years," says Tim Lilienthal, a housing activist.
The bank took over a house in November and in February Dutra bought it for $325,000.
"To me, the good thing is it's in Santa Clara and it's mine," says Dutra.
Realtors say another wave of loans will reset next year. That's why they expect more homes will fall into foreclosure by spring 2011.