NEW YORK (MainStreet) — The housing sector got some news this week from the Fourth Quarter National Delinquency Study, released by the Mortgage bankers Association. In it, MBA economists say home mortgage delinquency rates are down, some of them to pre-recession levels.

Despite showing signs of growth in December 2010, the existing home sales are still down by 2.9% on a year-to-year basis, according to the National Association of Realtors.

Plus, the national median home price stood at $168,800 in December 2010, 1% below December 2009 levels. The NAR reports that a good chunk of buying activity is linked to distressed properties. That number rose to 36% of all home buying market share in December 2010, from 33% in November and 32% in December 2009.

“The modest rise in distressed sales, which typically are discounted 10 to 15% relative to traditional homes, dampened the median price in December, but the flat price trend continues,” says NAR chief economist Lawrence Yun.

Thus, a dose of good news on mortgage delinquencies - if it’s sustainable - may spur housing sales and prices to rise a few months from now. 

The MBA reports that the U.S. home mortgage delinquency rate fell to 8.22% in the fourth quarter of 2010, down from 9.12% from the previous quarter. The Q4 numbers also were down from 9.47% in the fourth quarter of 2010.

Even foreclosure actions are in decline. The MBA says that the percentage of foreclosures slid slightly from the third to fourth quarter, from 1.34% of all U.S. homes to 1.27%.

Clearly, U.S. homeowners are starting to get a better grip on their mortgage payments, and that’s a boon not just to the housing market, but the overall economy, too.

With less actual foreclosures, and less potential foreclosures (thanks to homeowners cutting down on delinquency rates), the housing market should grow more stable. In addition, with fewer foreclosed homes appearing on the market, the housing sector can more easily shed the inventory of foreclosed properties currently for sale. Within time – maybe six months to a year – that will help cull the market of cheaper properties and strengthen home values in those same neighborhoods.

Jay Brinkmann, MBA's chief economist says "These latest delinquency numbers represent significant, across the board decreases in mortgage delinquency rates in the US. Total delinquencies, which exclude loans in the process of foreclosure, are now at their lowest level since the end of 2008.  Mortgages only one payment past due are now at the lowest level since the end of 2007, the very beginning of the recession.”
Brinkman adds that U.S. home loans that are three-months or more past due have dropped from 5.02% to 3.63% by the end of the year. That’s a decline of 28%  - a big number, and an encouraging one for the housing market.

The MBA expects this trend to continue in 2011 – another piece of good news.

"While delinquency and foreclosure rates are still well above historical norms, we have clearly turned the corner,” adds Brinkmann. “Despite continued high levels of unemployment, the economy did add over 1.2 million private sector jobs during 2010 and, after remaining stubbornly high during the first half of 2010, first time claims for unemployment insurance fell during the second half of the year. Absent a significant economic reversal, the delinquency picture should continue to improve during 2011," Brinkmann said.  

After month after month of hearing economists say, “we’re not out of the woods yet” regarding the housing market, it seems we can finally catch a glimpse of sunlight through the trees.

Maybe 2011 won’t be so bad after all for the housing market.

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