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Foreclosure filings in the Twin Cities area rose during the third quarter, but are down from last year at this time, according to data released Friday by RealtyTrac.

The firm said that in the metro area, which includes parts of western Wisconsin, 8,739 households received a foreclosure notice during the third quarter. That's 0.65 percent of all households, or one filing for every 154 households.

Foreclosure activity was up 8.6 percent from the second quarter, but down 10.5 percent from the third quarter of 2009.

Despite the quarter-to-quarter increase in the Twin Cities, the region is relatively healthy compared to the rest of the country. Nationwide the filing rate was 0.72 percent, only 3.9 percent ahead of the second quarter, but down almost a percentage point from last year at this time.

Of 206 metro areas with populations of more than 200,000, 6 percent posted year-over-year increases in foreclosures. The 10 cities with the highest rates were in California, Florida, Nevada or Arizona. The Twin Cities ranked 76th. Las Vegas-Paradise had the highest foreclosure rate during the third quarter, with one of every 25 households receiving a foreclosure filing.

Aaron Dickinson, a sales agent for Edina Realty who tracks foreclosures, said variability of the processing system affected the quarter-to-quarter increase, but activity is expected to remain strong.

"Foreclosures are and will likely continue to be a significant part of our sales activity for some time," he said.

In the Twin Cities, for example, 300 to 500 short sales occur every month, about 25 percent of all lender-mediated sales, Dickinson said.

According to the Minneapolis Area Association of Realtors, the supply of lender-mediated listings (short sales and foreclosures) on the market during September increased 35.5 percent over the previous year. The number of lender-owned listings that were added to the market last month increased 5.8 percent, while new short sale listings fell 11.5 percent.

Distress sales are an important indication of the health of the broader market. A high percentage of them can be a drag on area house prices because they create competition for traditional listings and are often eyesores that can reduce the value of nearby houses. During September the median sale price of bank-owned sales fell 3.3 percent to $114,900 and short sales fell 4.7 percent, to $143,000, according to the Realtors group. Sale prices for traditional listings that month rose 7.6 percent, and at $215,250, were nearly double those of distress sales.

"While the numbers are still very high, the inventory of foreclosed homes for sale in the Twin Cities is still down nearly 40 percent from where it was two years ago at this time," Dickinson said. "A moderate bump in new foreclosures for sale shouldn't have a large impact in our market in the short term."

Jim Buchta • 612-673-7376