Three states—Nevada, Arizona, and California—continued to report the country’s highest foreclosure rates through the first six months of 2011, during which foreclosure activity nationwide was down by more than 29% to 1,170,402, compared to the same period a year earlier, according to RealtyTrac, the online marketplace for foreclosure properties.

While filings on properties in June were 4% higher than in May, June was the ninth straight month with filings that were lower than the same month a year ago.

These declines, while surely welcomed by builders, Realtors, and homeowners alike, had less to do with improvements in the economy than with processing and procedural delays that “are pushing foreclosures further and further out,” explains James Saccacio, RealtyTrac’s CEO, in a prepared statement released Thursday morning. Indeed, the tracking service estimates that up to 1 million foreclosure actions—including default notices, auctions, and bank reposessions—should have taken place through the first half of the year but didn’t. Saccacio reiterates RealtyTrac’s long-held contention that the housing market can’t realistically recover until this shadow inventory of distressed properties is reduced to a “manageable number.”

RealtyTrac estimates that the foreclosure process took an average of 318 days from the first notice to completion in the second quarter of 2011, compared to 277 days in the same quarter last year. New York had the dubious distinction of leading the nation in the length of its foreclosure process—a whopping 944 days. Florida was next, at 676 days. Conversely, Texas’ process took the least time of any state, 92 days.

Market conditions, though, remain volatile. The New York Times reported earlier this week that the proposed $8.5 billion settlement between the U.S. government and Bank of America—to resolve the bank’s careless bundling of mortgages for resale as securities—could result in “tens of thousands” of borrowers being evicted from their homes. An estimated 1.3 million of BofA’s borrowers are at risk of foreclosure, and the bank reportedly has been less willing to offer loan modifications as a percentage of unpaid principal than other lenders.

That said, foreclosure filings continue to recede in the markets worst hit by them. In Nevada, 53,217 housing units—one in 21 homes—received a foreclosure filing in the first half of the year. Yet that total was 17% lower than filings in the same six months a year ago. ForeclosureRadar, another tracking service that focuses its coverage on activities in five western states, reported that June default filings alone in Nevada were at their lowest level since August 2009, and that Notice of Trustee Sales filings were the lowest in 15 months.

Similar trends are evident in Arizona and California, even as the latter state continued to lead the country in the number of properties—263,500—that had received a foreclosure filing through the first half of the year, according to RealtyTrac. That was down nearly 23% from the same six months in 2010.

The District of Columbia, which has emerged as one of the quickest-recovering housing markets in the country, led all states in reducing its foreclosure activity, which fell by nearly 88% in the first half of the year compared to the same period in 2010.

John Caulfield is senior editor for BUILDER magazine.

Learn more about markets featured in this article: Phoenix, AZ.