See Why Foreclosure Rates Are Falling in 2011

While foreclosure activity in the real estate market (NYSE:IYR) during the first half of the year was down compared to the first six months of 2010, foreclosure filings in Seattle climbed 10% this year compared to last. Seattle was the only city out of 20 of the most populated metropolitan areas in the U.S. to post an increase in foreclosures activity, which includes default notices, auction sale notices, and bank repossessions.

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One in every 98 homes in the Seattle area received a foreclosure notice in the first six months of 2010. With a 1.03% foreclosure rate, Seattle came in at number 57 on a list of 211 cities, increasing its overall standing from 97th place a year ago. Conversely, foreclosures fell by 74% in Baltimore, lowering its ranking to 182nd place in the first half of 2011, down from 83rd place last year. Washington D.C. dropped from 67th to 131st place, and Boston fell from 120th to 158th place. Overall, foreclosure activity not only declined in 19 of the 20 most populated metropolitan areas, but in 178 out of 211 cities with populations of 200,000 or more, with Seattle the striking exception that proves the rule.

While the decrease in foreclosures might seem like a positive economic sign, the numbers might have more to do with changes to the foreclosure process rather than fewer people defaulting on their mortgages. With the added scrutiny of federal regulators, banks and other financial firms have been slowing down the foreclosure process. Furthermore, areas that use a judicial foreclosure process have been swamped with foreclosures over the last couple years, which are now becoming backlogged. In fact, all of the 20 metro areas showing the most significant declines in foreclosure activity were located in states with judicial foreclosure processes.

Las Vegas holds the top spot for having the largest rate of foreclosures — one out of every 19 households received a foreclosure notice in the first six months of 2011. And yet even that was an improvement over last year, with the rate of foreclosure down 18% from both the first and second halves of 2010. Rounding out the top 10 cities with the most foreclosures are Phoenix, with a foreclosure rate of 3.51%, Modesto, CA at 3.32%, Stockton, CA at 3.24%, Riverside-San Bernardino-Ontario, CA at 3.21%, Vallejo-Fairfield, CA at 3.09%, Reno-Sparks, NV at 2.96%, Bakersfield, CA at 2.78%, Merced, CA at 2.78%, and Sacramento-Arden-Arcade-Roseville, CA at 2.53%. Note that all of the cities with the top rates of foreclosure are located in California, Nevada, and Arizona, where there is no judicial foreclosure process.