Fewer behind on mortgages, building permits show uptick

— -- The share of borrowers falling behind on home loans dropped in the third quarter, and building permits for single-family homes climbed in October to their highest level in 10 months, new data show.

The reports bring "some of the most solid, relatively good news" that the housing sector has seen in some time, said Jed Kolko, chief economist for real estate website Trulia.

The Mortgage Bankers Association said Thursday that the share of mortgage borrowers who have missed at least one payment — but are not yet in foreclosure — fell to 8% in the third quarter from 8.4% in the second quarter.

The share of borrowers more than 30 days behind but less than 60 days late fell the most, to a four-year low of 3.2% from 3.5% in the second quarter.

That drop suggests that fewer borrowers are falling behind for the first time, which will reduce foreclosures years from now.

Still, 4.2 million borrowers are more than 90 days behind on their mortgages or are already in foreclosure. Most of those borrowers will lose their homes to foreclosure or other distressed sales in the coming years.

That will continue to put pressure on home prices, said Paul Dales, economist at Capital Economics. He expects U.S. home prices, down about 4% from last year, to stay flat next year.

"We're moving in the right direction, but we're still well above normal" for troubled loans, said Michael Fratantoni, MBA's vice president of research and economics.

He says the number of new delinquencies should continue to decline if job growth continues.

Home building is also well below normal, even with the stronger October showing.

Housing starts slipped slightly in October from September to an annual rate of 628,000, the Commerce Department said Thursday. That's about half the pace of long-term trends leading up to the housing bubble.

Single-family starts were up 3.9% from September.

Permits, which are better indicator of future activity, rose 5.1% for single-family homes and 24% for multi-family units, the Commerce Department said.

The October results point to a single-family market that's "finally getting off the mat" and a multi-family segment that's making "small strides," said Patrick Newport, economist at IHS Global Insight. Still, single-family home starts and permits are likely to set record lows this year, Newport says.