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Reports Show Housing Woes Are Mending

The U.S. housing market got good news Thursday as two reports showed a continued decline in the number of distressed properties.

It could boost the supply of homes on the market, as people who've wanted to sell finally find themselves in a better position to do so.

The percentage of equity-rich homeowners is "nearing a tipping point" that should result in a larger inventory of homes listed for sale, RealtyTrac Vice President Daren Blomquist said in a statement. In turn that should give the economy "a nice shot in the arm" this year.

RealtyTrac, a housing data tracker, said 9.3 million U.S. residential properties were deeply underwater in December, 19% of all properties with a mortgage. It was down from 10.7 million in September 2013, or 23% of properties with a mortgage.

Deeply underwater means the combined loan amount secured by the property is at least 25% higher than the property's estimated market value. The peak in recent years was May 2012, when 12.8 million were deeply underwater, 29% of all mortgaged properties.

"During the housing downturn we saw a downward spiral of falling home prices resulting in rising negative equity, which in turn put millions of homeowners at higher risk for foreclosure when they encountered a trigger event such as job loss," Blomquist said. "Now we are seeing the reverse trend: rising home prices resulting in falling negative equity, which in turn is giving millions of homeowners a lifeline to avoid foreclosure when they encounter a trigger event.

In a separate report, industry researcher CoreLogic (CLGX) said there were 46,000 completed foreclosures in the U.S. in November 2013, down 29% from the prior year and 8.3% from the previous month.

The nation's residential shadow inventory — which measures homes that are either in foreclosure and have not been sold or those that are not on the market due to weakness in prices — numbered 1.7 million homes as of October, CoreLogic said. The combined value of these homes was $256 billion, down 26% from a year earlier.

Completed foreclosures are homes actually lost to foreclosure. As of November, about 812,000 homes in the U.S. were in some stage of foreclosure, down 34% from a year earlier.

Companies in IBD's Building-Residential Commercial group slipped slightly in the stock market Thursday. The group, which ranks No. 142 of 197 industries tracked, is up about 13% over the last three months but down 2% in January.

The five biggest builders by market cap — Pulte Group (PHM), Lennar (LEN), D.R. Horton (DHI), Toll Bros. (TOL) and NVR (NVR) — have all seen improving financials in recent quarters as the housing market has rebounded. All five stocks are up double-digit percentages in the last three months but down between 1% and 3% in January.

After double-digit gains in home prices and sales in 2013, the housing market is expected to see slower home price growth and strong building demand in 2014.