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Home loans one payment past their due date have fallen to their lowest level since the start of the recession, the Mortgage Bankers Association said.

Loans that are more than 90 days overdue also have fallen significantly, from an all-time high of 5 per cent at the end of the first quarter of 2010 to 3.6 per cent at the end of the fourth quarter, the MBA said on Thursday.

Every state but North Dakota, Oregon and Arkansas saw a drop in the 90-day delinquency rate.

“The delinquency rate is the best leading indicator we have of where the housing market is heading,” said Mike Fratantoni, the MBA’s vice-president for single family research. “All told, the delinquency numbers are sending a very clear message that we’ve turned a corner and that things are improving.”

Mr Fratantoni said the main reason for the decline in delinquencies was the 1.2m jobs that were created in 2010. “When the unemployment rate drops, the delinquency rate also falls,” Mr Fratantoni said.

Despite these improvements, the US housing market is still facing problems that will take years to work through. The number of homes in foreclosure remains at record highs and is expected to continue to weigh on home prices, which analysts say could decline between 5 per cent and 10 per cent this year.

The backlog of foreclosed homes continued to grow in the fourth quarter as banks restarted proceedings after paper work problems caused temporary suspensions. Mortgage servicers are currently under investigation by federal authorities and may be hit with multiple fines for sloppy practices.

Florida continued to have the highest foreclosure rate in the country, followed by Nevada. Nearly one-quarter of home loans in Florida and 22 per cent in Nevada are delinquent or in foreclosure, the MBA said.

Although the MBA expects the delinquency rate to continue to decline in 2011, it may fall more slowly as loans that were modified to reduce monthly payments begin to re-default. Analysts predict that nearly two-thirds of these modified loans will be delinquent again one year after receiving a modification.

Nevertheless, David Wyss, the chief economist with Standard & Poor’s, said the decline in the rate of newly delinquent homes was “very significant”.

“The good news is that the problem is no longer getting worse,” Mr Wyss said. “The bad news is that it will still take a long time to clear out these foreclosed homes.”

Copyright The Financial Times Limited 2017. All rights reserved.

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