Based on a report released by a foreclosure tracking firm, the Reno-Sparks metro area ranked ninth among 203 metropolitan areas throughout the U.S. based on foreclosure rates in the July to September quarter.

During the same quarter in 2008, the Reno area ranked only 19th, with a foreclosure rate of one out of every 66 units. Now the metro area soared to the top ten list, with a foreclosure rate of one out of every 37 residential units.

Housing analysts interpreted the quick rise of the Reno area in the foreclosure charts as a sign of the severity of the housing problem in Reno.

The other large Nevada metro area, Las Vegas, topped the foreclosure chart in the July to September period, with a rate of one out of every 20 units. Over the past 33 consecutive months, Las Vegas occupied the top of metro-area foreclosure charts based on pace of foreclosures. So investors, particularly those living in Nevada, can capitalize on a low-priced foreclosed property on sale in Reno or Las Vegas.

Brian Kaiser, a real estate analyst at the University of Nevada Center for Regional Studies, said that more foreclosures are expected in the Reno-Sparks area in the next several months. During the quarter, actual foreclosures of houses and condo units increased by 39 percent from the second quarter and the number of default notices soared by a staggering 111 percent in the first three quarters of 2009 from the same period last year.

Kaiser explained that not all delinquent borrowers allow their houses to go into foreclosure, but based on past default and foreclosure trends, lots of foreclosures will enter the market in the coming 6 to 9 months.

The university analyst said further that record levels of unemployment and the resetting of adjustable mortgage loans to higher rates are the main culprits for the soaring foreclosures.

In Washoe County, where Reno is located, the unemployment rate in September has hit 13.1 percent, according to UNR economics professor Elliott Parker. Parker added that home prices have plunged to price levels lower than those in the 1990s and in the 1980s because of the low price levels of foreclosed property on sale.

With a foreclosure rate of one housing unit out of every 62 households in August, Nevada continues to have the fastest pace of foreclosure in the country. Nearly 18,000 Nevada households received foreclosure filings during the month, a significant rise of 53 percent from foreclosure filings in August last year.

Because of its foreclosure situation, Nevada was given almost $72 million in federal assistance out of the approximately $3.9 billion allocated for the first funding round of the Neighborhood Stabilization Program across the country. Another $1.9 billion is being prepared for distribution to states and local governments for their stabilization and economic rejuvenation efforts.

In many areas that received NSP funds, most of the funds were provided to nonprofit housing agencies to buy vacant foreclosed homes for sale and fix them for resale as affordable housing units to lower income families.

The rest of the funds were used to demolish blighted buildings and houses to clear spaces for the construction of new affordable housing units.

Henderson was among Nevada cities that received NSP funds, getting a share of $4.1 million. The city has just worked out the papers for the first beneficiary of its program to help first time home buyers.

The first beneficiary is a casino accounting clerk with an annual income of less than $30,000. The city program was able to help her buy a 3-bedroom home for $49,500. Now she pays only $426 a month for a big home where her children who have been staying with friends can stay for a longer time.

Under the city program, qualified applicants are those that earn 120 percent or less of the city’s median income of $76,700 for a family with four members. The program also requires that around 25 percent of recipients belong to a lower income bracket, which is less than $31,900.

Applicants are also required to look for a house in neighborhoods with the highest rate of foreclosed homes for sale in the city as identified by city housing officials. They also need to repay the loan assistance provided under the NSP program if they sell their homes within 5 years.

In July, the number of notices of defaults, scheduled foreclosure auctions and bank foreclosures reached a total of 19,535, an increase of 4.1 percent compared with June and 94 percent higher from July of last year.

Also last month, Washoe County posted 409 foreclosure properties and 711 foreclosure filings. Industry analysts could not pinpoint the real reasons why Nevada keeps leading the country in foreclosure activity. They said that during the peak of the housing market, Nevada led the country in terms of housing starts. They added that during that time, many people bought houses with poor loans.

Market data showed that one out of 56 households in Nevada received a foreclosure filing last month, six times greater than the national average rate. Analysts noted that the number of initial notices of defaults in the state dropped by 18 percent in July compared with the previous month.

They said that the decline was due to the state law mandating lenders to provide mediation to distressed homeowners who are facing the possibility of foreclosure.

In Las Vegas, foreclosure filings were posted on 16,798 properties last month or one out of 47 households, 7.5 times greater than the national foreclosure rate average. Las Vegas also had the highest number of foreclosure homes among metropolitan areas in the country with population of 200,000.

The foreclosure activity in the city rose by about 6 percent compared with June and 89 percent from the total figures in July 2008.

For the first six months of this year, Nevada also led the country in foreclosure activity. Over 6 percent of households or one in 16 received a foreclosure filing for the period. From January to June, 68,708 properties in Nevada received a foreclosure filing, representing a 23 percent rise from the second half of 2008 and 61 percent higher from the first half of last year.

In the first three months of this year, 41,296 properties in Nevada received a foreclosure filing, a 19 percent rise from the last quarter of 2008 and a whopping 111 percent increase from the first quarter of last year.

The high unemployment rate in Nevada is being blamed as the major factor that fuels the foreclosure activity in the state.

According to the study, banking institutions purchased about 6,472 foreclosure properties and sold almost double, totaling 11,254 for the first six months of this year. Most bank-owned properties are acquired by lenders through trustee sales. Data showed that the number of real estate owned in Las Vegas dropped by 13,200 at the end of the first half of 2009 from 16,000 at the start of the year.

Industry experts pointed out that the decline in foreclosure listings may be due to voluntary foreclosure moratoriums by banks and increased investor activity. But they expect things to change as foreclosure moratoriums ended in March and acquisition activities by banks rose by 40 percent last June and 55 percent last May.

Experts said that if the current trend continues, the housing market could expect a glut of bank-owned properties in the third quarter of this year, together with a dramatic drop in home prices. They noted that foreclosures by government-sponsored enterprises, Freddie Mac and Fannie Mae are expected to rise by as much as 500 percent before the end of this year.

Some experts pointed out that banking institutions are holding off their foreclosure home inventory because they do not want to pay more property taxes.

The first wave of foreclosures that hit Nevada and the rest of the country was caused by the collapse of the subprime loan market and high volume of homeowners who defaulted on their adjustable-rate mortgages.

Industry analysts expect that prime borrowers will bring the next wave of foreclosures. They explained that many prime loan borrowers are expected to go into default due to unemployment and drastic decline in home values which left many of them owning properties less than the total amount they owe for their mortgages.

Meanwhile, industry data showed that last June, Las Vegas saw about 12,545 houses for sale, including short sales and bank foreclosures. The figures were said to be smaller compared with 20,613 houses reported by a real estate association.

About 13,028 homes are listed for sale on the Las Vegas market, a 41.5 percent drop or 9,224 compared with the previous year.