A 'bank foreclosure sale' sign is posted in front of townhomes on August 12, 2010 in Los Angeles, Calif. - 

The rate of foreclosures in July was down 32 percent from a year earlier, according to RealtyTrac. That sounds like good news, but it masks a stubborn reality that the housing market is still troubled.

There are still 2.8 million loans that are 90 days delinquent or in some stage of foreclosure, estimates Chris Mayer, professor of real estate at Columbia Business School. 

“It’s still a significant problem," Mayer says.

And on the home buying side, two factors are jamming things up. 15-20 percent of homeowners with mortgages are still underwater, says Adam Levitin, professor at Georgetown Law. Homeowners who are under water don’t sell.

“It’s market specific,” says Levitin, but “take something like Las Vegas where you have a large number of underwater home owners that are really unable to sell their homes,” -- that puts a crimp in housing inventory.

Second, home buyers are now competing with investors in distressed markets says Mayer.

“You hear homeowners saying gee I want to jump into the market but I can’t find anything to buy, and that’s a hard dynamic," he says. “It’s not like the housing crisis is over and we can declare victory.”