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Real estate borrowing leads drop in fourth-quarter indebtedness

Household debt in the U.S. declined 1.1 percent during the fourth quarter as real estate borrowing fell, according to a Federal Reserve Bank of New York survey.

Consumer indebtedness shrank $126 billion from the end of September to $11.53 trillion Dec. 31, according to a quarterly report on household debt and credit released Monday by the district bank.

Mortgages and home-equity lines of credit declined a combined $146 billion, and total delinquency rates dropped to 9.8 percent of outstanding debt "in some stage of delinquency," from 10 percent at the end of September.

"While we continue to see improvements in the delinquent balances and delinquency transition rates this quarter, there has been a noticeable decrease in the rate of improvement compared to 2009-2010," said Andrew Haughwout, vice president and economist at the New York Fed. "Overall, it appears that delinquency rates are stabilizing at levels that remain significantly higher than pre-crisis levels."

Three straight months of faster job growth coupled with a stock market rally since late 2011 are helping make Americans more optimistic about an economic recovery that Fed Chairman Ben S. Bernanke said has been slowed by weakness in the housing market.

Policy makers last month said their benchmark interest rate is likely to stay "exceptionally low" through at least late 2014 to help the recovery gain traction, extending an earlier date of mid-2013.

About 289,000 consumers showed new foreclosures on their credit reports in the fourth quarter, up 9.5 percent from the third quarter, the New York Fed's survey showed. There were 425,000 new bankruptcies, 14.9 percent less than in the last three months of 2010.

Mortgage originations for 2011 amounted to $1.55 trillion, the lowest since 2000 and down 3.1 percent from 2010, according to the New York Fed report. Bernanke and the policy-setting Federal Open Market Committee are debating a new round of mortgage-bond purchases to help boost the housing market and the economy.

Non-real estate borrowing climbed $20 billion, or 0.8 percent, to $2.635 trillion, according to the New York Fed survey.

The New York Fed report is based on data compiled by the district bank's Consumer Credit Panel, a "nationally representative random sample" from Equifax Inc. credit-report data, the statement said. The Fed's quarterly flow of funds report includes household debt, along with debt measures for nonfinancial businesses, state and local governments and the federal government.

Confidence among U.S. consumers rose more than forecast in February, reaching a one-year high as Americans grew more upbeat about the outlook for the economy.

The Thomson Reuters/University of Michigan final index of consumer sentiment increased to 75.3 this month from 75 in January. The median estimate in a Bloomberg News survey called for 73, after a preliminary reading of 72.5.