Foreclosures increased slightly from April to May across the Bay Area, but are down sharply from a year ago as banks seek other ways of dealing with homeowners behind on their payments, according to a report Tuesday.

Instead of foreclosing on homes, lenders have been turning more to short sales -- the sale of a home for less than is owed on it -- and to various government programs to help homeowners hang on to their houses.

Banks "are realizing if they going to clear this stuff off their books, it's not going to be solely through foreclosures," said Michelle Lenahan of ForeclosureRadar, which released the report.

"It's good news," said Dustin Hobbs of the California Mortgage Bankers Association. "It's good to see the efforts of loan servicers and government agencies start to pay off a bit. There still is plenty of work to be done. No one's popping champagne yet, but it's positive news ."

Hobbs said stabilizing home prices in some areas has helped keep people in their homes as well. He said he expects foreclosures to be "flat" for a while. " I don't think we'll see any wild swings," he said.

While fewer homes entered the foreclosure process in Santa Clara and Contra Costa counties, actual foreclosures -- homes sold at the courthouse steps or taken back by banks -- increased slightly from April in Alameda, San Mateo, Santa Clara and Contra Costa counties. But they were down 40 to 50 percent or more from a year ago in those counties.

The smaller inventory of foreclosed homes has investors snapping up what the banks are selling, driving up prices, ForeclosureRadar said.

"We're seeing more investors bidding on those properties," Lenahan said of the Discovery Bay foreclosure tracking service.

"These investors are telling us they are paying market rate or above market rate because there's no inventory out there," she said.

The median price paid for a foreclosed home at auction was at $369,000 in Santa Clara County; $328,000 in Alameda County; $271,000 in Contra Costa County and $500,000 in San Mateo County.

Along with fewer foreclosures, there were about half the number of active listings in Contra Costa County in April compared with a year earlier, said Barbara Safran of the Contra Costa Association of Realtors.

"We just don't have a lot on the market," she said.

A lack of enough homes for sale to meet a growing demand has been a complaint of real estate professionals for several months.

With few homes for sale, most are drawing multiple offers, driving up prices, said Dawn O'Neal of Realty World Executive Advantage in San Jose.

"We've got multiple offers coming in on just about everything," O'Neal said.

The Bay Area mirrored a statewide trend. Foreclosures were up 6 percent across the state, and sales to third parties were up 14 percent from April.

Contact Pete Carey at 408-920-5419.