The percentage of Utah home loans in foreclosure at the end of the second quarter was 0.74 percent, down from a peak of 2.03 percent just two years earlier, the Mortgage Bankers Association reported Wednesday in its National Delinquency Survey.

Utah, once among the top 10 states in foreclosures, now is below the national average of 0.99 percent. Thirty states have higher foreclosure rates than Utah.

The share of delinquent loans in which Utah homeowners have fallen behind on their payments dropped to 3.56 percent in the second quarter, down from 4.65 percent two years earlier. Again, Utah is below the national average of 4.39 percent.

Even though Utah's economy is showing signs of slowing down, the state is creating jobs at one of the highest rates in the country. More jobs generally mean fewer foreclosures because people who are laid off can, in many cases, find other work relatively fast.

Other positive factors are the strong home appreciation over the past year, especially along the Wasatch Front, and how quickly homes are selling. Homes in many areas of Salt Lake County have appreciated in the double-digit range this year; many sell within days or weeks after hitting the market.

"Right now, appreciation is the key" to the lower foreclosures and defaults, said Salt Lake City real estate agent Aaron Marshall. Today a family that is three or four months behind on its mortgage payments is more likely to be able to hire a real estate agent, sell the house, pay closing costs and still walk away with some amount of cash.

Just three years ago, he said, many families had no equity - or owed more than their homes were worth - and were more likely to allow their homes to fall into foreclosure rather than try to sell them.

Still another factor in the drop in foreclosures is comparatively low interest rates. Although rates on mortgages are not as desirable as they once were, 30-year loans still can be had in the 6.5 percent range. Low financing costs help push down the number of foreclosures.

In the mortgage bankers report, economist Doug Duncan said he expects to see "modest increases" in both delinquency and foreclosure rates nationally in the months ahead because of the downturn in real estate markets in many parts of the country, some of which are seeing little or no appreciation or even price decreases.

Utah also probably will see see an increase, said economist Gus Faucher at Moody's economy.com.

Faucher believes Utah's real estate market, which over the past year has heated up, has just about peaked. Homes will take longer to sell and appreciate more slowly next year, he said.

Utah is "going to see in the next six to nine months a dramatic slowing in price appreciation" from double-digit appreciation to about 5 percent.

He said the dramatic increases could have gone on longer, had interest rates not risen and Utah's job growth continued to accelerate. Utah's job growth, although high, is showing signs of leveling off.

Also, Faucher said, prices have risen to a point where affordability is becoming more of a problem. A drop in the number of residents who can afford to buy homes tends to slow appreciation, as well.

That said, "Utah's in better shape than the rest of the country in terms of the housing market because the price gains there have been much more moderate over the last three to four years, compared with what has gone on nationally," he said.

lesley@sltrib.com