The U.S. economic recovery hit a speed bump as American foreclosures rose to record levels in April, according to new data released Wednesday.

RealtyTrac, a California-based company that markets real estate, said that banks and other authorities slapped foreclosure actions on more than 340,000 properties in the month.

Foreclosures in April represented only a one per cent rise compared with February but were up 32 per cent versus April 2008.

U.S. foreclosures in April were up 32 per cent from a year earlier. (Paul Sakuma/Associated Press)

The extra 858 foreclosures in the month concerned analysts, who had expected a drop in activity in the wake of March's 17 per cent spike in real estate seizures.

Worse still, April's small increase was more likely due to government and industry-imposed moratoriums on such drastic real estate actions, experts noted.

"This suggests that many lenders and servicers are beginning foreclosure proceedings on delinquent loans that had been delayed by legislative and industry moratoria. It’s likely that we’ll see a corresponding spike in [this activity] as these loans move through the foreclosure process over the next few months," said James Saccacio, RealtyTrac's chief executive officer.

RealtyTrac's survey tracks filings at all stages of the foreclosure process including default notices, auction sale notices and bank repossessions.

The four states with the largest numbers of foreclosures — California, Florida, Nevada and Arizona — represented 58 per cent of the U.S. total.

Crumbling property values

The crashing American real estate market has been a major factor in the limping U.S. economy for the past 10 months.

Prior to the summer of 2008, Americans used liberal lending vehicles to pay for new homes with huge amounts of borrowed cash.

As the economy slowed, however, the worth of these properties tumbled, hampering the ability of U.S. home owners to cover their interest and principal payments.

For instance, a May study by the online real estate site Zillow.com indicated that more than one in five Americans owed more in mortgage debt than the actual worth of their homes.

Foreclosures as signposts

Economists often view the number of seized homes as a backward-looking indicator of economic conditions. That is because people usually hold on to their residences as long as possible, even in the face of unemployment.

Many Americans, however, also used the value of their properties to backstop other types of consumption. Thus, the rising foreclosure levels combined with slumping property values overall indicate that consumers face drastically reduced personal net worth and will have no ability to increase their spending in the near future.

The median price of a home across the United States fell 14 per cent in the first three months of 2009 and stands at $169,000 US, according to the National Association of Realtors.