Fewer foreclosures were started and completed in July as the Massachusetts housing market and overall economy continued to slowly improve, according to data released Monday.
The number of foreclosure petitions — the first step in the seizure process — dropped to 1,198 in July, nearly 17 percent fewer than during the same period last year and the lowest monthly total recorded in 2012, according to the Warren Group, a Boston company that tracks local real estate.
Foreclosure deeds — which signal the completion of the process — fell to 648 in July, also a 17 percent drop compared with July 2011. That was the smallest number of foreclosures recorded in a month since May 2011.
The slowdown in home-takings comes as the state’s economy and housing market are doing better. The Massachusetts unemployment rate in July was 6.1 percent, a long way from its 2010 peak of 8.7 percent.
And home values in Massachusetts rose by nearly 6 percent between March and June, according to the S&P/Case-Shiller Home Price Indices.
‘Homeowners are making payments and working out defaults through short sales and loan modifications.’
Alan Clayton-Matthews, an economist at Northeastern University, said the newest foreclosure numbers are in line with other recent statistics.
“The economy has been fairly slowly but steadily improving. You would expect to see an effect in [mortgage] default rates,” Clayton-Matthews said.
A multistate settlement between major US banks and attorneys general that resulted in about $25 billion to help troubled homeowners nationwide also is helping to wind down the number of foreclosures in Massachusetts.
“Homeowners are making payments and working out defaults through short sales and loan modifications,’’ said Timothy M. Warren Jr., chief executive of Warren Group.
But despite the slowdown in foreclosure activity for July, home seizures in Massachusetts remain ahead of last year’s pace. In 2011, lenders sped up foreclosure efforts to rid their portfolios of properties that had been long in mortgage default.
Between January and July, 10,623 foreclosure petitions were delivered to Massachusetts homeowners, a 55 percent increase compared with the same period in 2011. The number of foreclosure deeds totaled 5,409 during the first seven months of the year, an 18.5 percent jump compared with 2011.
Virginia Pratt, a foreclosure prevention specialist in Jamaica Plain, said she has been taking on fewer new clients lately, but she is not ready to say the foreclosure problem has substantially subsided.
“Hopefully, it means people are doing better,’’ Pratt said.
Lewis Finfer, director of the Boston-based nonprofit Massachusetts Communities Action Network, said that although dropping numbers are a positive indicator, the foreclosure crisis will not disappear anytime soon. Government policy makers must do more to help homeowners struggling to pay their mortgages, he said, especially by reducing the loan principal on properties that are “underwater” — meaning they are worth less than the size of their mortgages.
“There is a huge amount of the housing market and the economy that is stuck because so many people have mortgages,” that are underwater, Finfer said. “We still have a significant problem that needs public policy work.”