U.S. homes facing foreclosure almost doubled in July as property owners with adjustable-rate mortgages saw their payments rise and were unable to refinance because of the subprime crisis, RealtyTrac Inc. said.

Lenders sent 179,599 notices of default, scheduled auctions or bank repossessions last month, a 93 percent increase from a year earlier, RealtyTrac, based in Irvine, Calif., said today in a statement. California, Florida, Michigan, Ohio and Georgia accounted for more than half of the country's total filings.

"Home prices rose so high in those states that homebuyers needed aggressive, exotic mortgages, such as subprime, to afford to buy," Wachter said. "Those are the mortgages that default first," said Susan Wachter, professor of real estate at the University of Pennsylvania's Wharton School in Philadelphia.

An increase in foreclosures will add more homes to the market and further erode values. U.S. home sales dropped to a four-year low in the second quarter and prices fell in a third of U.S. cities, according to the National Association of Realtors. In June, a nearly nine-month supply of houses was on the market, double that of two years ago.

"Home equity has been a major factor in consumer spending, and the major concern is we'll go into a recession as that equity dries up," Wachter said. "Consumer spending drove us out of the last recession in 1991, and we might see a reversal of that now."

Forty-three states had year-over-year increases in foreclosure activity, and the total rate rose 9 percent from the previous month, RealtyTrac said.

Foreclosures undermine the confidence of mortgage bond investors by revealing property values as lower than the loans they collateralize, said Keith Shaughnessy, president of Foundation Mortgage Corp. in Littleton, Mass.

"We are estimating that we will see about 2 million foreclosure filings this year," said Rick Sharga, RealtyTrac's executive vice president for marketing. "We honestly don't see it getting much better before it gets a little bit worse. If they default like the subprimes have been defaulting this year, we won't be out of the woods for another nine to 12 months," he said.

RealtyTrac's report includes properties in all three phases of foreclosure. The process begins when a borrower defaults on loan payments and the lender files a public default notice, called a notice of default or lis pendens. If the borrower doesn't make monthly payments after that time, the property goes to auction. The third phase begins when the lender takes ownership of the house, also called REO, or "real estate owned."

California foreclosure filings totaled 39,013 in July, about triple the previous year. The state led the nation in foreclosure for the seventh consecutive month, RealtyTrac, a seller of foreclosure data, said. Nevada ranked the worst with one filing for every 199 homes.