Mortgage debt has steadily gone down since housing's peak, as household net worth has gone up.

Residential mortgage debt continued to fall in the Federal Reserve’s Flow of Funds report for the fourth quarter, dropping $42 billion, or 1.5 percent.

Though it was the smallest drop since 2009, mortgage debt has now declined by $777 billion since 2006, with foreclosures, short sales and refinancings making up the largest share of the reductions, according to analysis by Calculated Risk.

Additionally, home loan debt fell 2.1 percent to $9.8 trillion, while mortgage debts for entire non-financial sector were down $209 billion. Unsurprisingly, the one sector that did post an increase in debts was multifamily, where mortgages were up by $8.6 billion.

In further positive news, consumer credit and household net worth were also up, with credit climbing by 6.9 percent in the fourth quarter (its fifth straight quarter of growth) and 3.5 percent for al of 2011, and net worth jumping by $1.2 trillion to close out the year at $58.5 trillion.

A Reuters piece on the Fed’s data pointed out another optimistic kernel – the ratio of household liabilities to after-tax income fell to 117.5 percent, the lowest its been since 2004. Though the jury is out on how low that ratio must fall for consumer spending to rebound, Ellen Zentner, an economist at Nomura in New York, told Reuters it definitely points to progress.

“Any little inroads we make bring us that much closer to getting back to a normal rate of consumer spending,” she said.

And better consumer spending, and the stronger market attitudes that accompany it, spell only good news for housing.