Hawai'i property foreclosure filings increased in August by their smallest margin in a year, but were still second highest following a record set in July.

A report by real estate research firm RealtyTrac said there were 869 foreclosure filings in the state last month. That was second most since 990 in July, roughly two years after the local housing market began weakening.

The August count was up 159 percent from August 2008, representing the smallest year-over-year increase for any month in the past year.

Observers caution that the less-severe rise doesn't necessarily mean the pace of new foreclosure cases is subsiding.

Local foreclosure attorney Marvin Dang said he hasn't seen any significant change in the number of homeowners facing foreclosure. "It seems to be about the same," he said.

Much of the reason the increase last month wasn't as big as other months during the past year is because there was quite a surge in August 2008 to 336 foreclosure filings from what had been 100 to 200 monthly filings in the year before that.

"We're sort of at a higher plateau so to speak," Dang said.

As a state, Hawai'i's rate of increase was still well above the U.S. average. The average increase nationally in August was 18 percent, RealtyTrac reported.

By county, Honolulu, or O'ahu, had the highest overall number of foreclosure filings at 302, but the lowest rate per household at one filing per 1,109 households. The Big Island had 179 filings, or one per 434 households. Maui had 176 filings, or one per 369 households. Kaua'i had 212 filings, or one per 138 households.

Part of the reason Hawai'i foreclosure filings are growing faster than many other states is that housing markets in other states crashed earlier and are now faring better, while Hawai'i's housing market has experienced a more moderate downturn that is still building modestly.

Hawai'i's foreclosure rate — the number of households for every foreclosure filing — was worse than 30 other states at one filing for every 583 households, but was still better than the national average of one filing per 357 households.

One bright spot in the data was that for a second straight month the foreclosure count was largely due to more homes repossessed by lenders as opposed to new foreclosure cases.

RealtyTrac reported that close to one-third of the 879 cases, or 272, were what's called real-estate-owned filings made when lenders take back homes. Until July, real-estate-owned filings represented a small fraction of total filings.

RealtyTrac counts a range of filings from default notices to trustee sale notices and lender repossessions.

Default notices, typically the earliest stage of foreclosure, totaled 110 last month. That was the lowest level since 102 in February and compared with a high of 279 in May.

Still, this might not mean fewer homeowners are having trouble with mortgage payments. That's because most foreclosure cases in Hawai'i are handled in a nonjudicial process where default notices often aren't a public record that can be counted.

So RealtyTrac may undercount these filings. On the other hand, total foreclosures may be over-counted because RealtyTrac's methodology includes different filings on the same property if the filings occur in different months.

For instance, a home acquired by a lender could have been counted twice before in earlier months first as a default notice and then as a trustee sale notice.

Another criticism of RealtyTrac's figures is that they include commercial property, which includes hotel-condominium and time-share units.

Still, experts agree that foreclosures in Hawai'i are a problem, as the economic slowdown that has included widespread cuts in wages and jobs has made it harder for homeowners to pay their mortgages. Relatively weak home sales also have made avoiding foreclosure harder for people who can't sell their house or pay their mortgage.

A January report by the Pew Center for Responsible Lending predicts there will be 18,600 homes lost through foreclosure in Hawai'i over the next four years, including 5,600 this year. The four-year projection equates to an average of 388 a month.

Last month, the Mortgage Bankers Association reported there were 2,200 home loans in Hawai'i that entered foreclosure between April and June representing an average 733 per month.