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The number of homes in escrow to be sold last month rose 2.7 percent as compared to July, but still lagged 2 percent behind numbers posted in August 2011, according to new figures from the California Association of Realtors.

The industry trade group blames the slowdown largely on the lack of available market supply, particularly in the REO, or “real estate owned (by banks due to foreclosure)” market.

Indeed, non-distressed “traditional” sales, in which the seller has equity and doesn’t need an existing lender’s permission to sell the property at a loss, make up a larger percentage of the market than at any point in recent history. Such sales accounted for 62.2 percent of the August total, whereas they were only 51.7 percent of the market a year ago.

Increasing values and the disappearance of interest-only and negative amortization loans, where payments don’t decrease (and may even increase) the principal balance are causing the number of “underwater” borrowers owing more than their homes are worth to decrease, though a recent estimate still said 22 percent of all homeowners with a mortgage still fall into this category.

In San Diego County, the total number of distressed sales fell from 27 percent a year ago to 17 percent last month.

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