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Lauren Vance has been shopping for her first home near Sacramento for five months.

The26-year-old police officer lost 13 bids in a competitive market markedby strong investor interest and a tight supply of homes for sale. Givenprice increases, she's also had to pursue smaller homes to stay insideher budget.

Almost 2,800 miles away in Jacksonville, homeownersAmanda and Chris Dean would like to buy a bigger home. But they haven'tbeen able to sell theirs for enough money to finance a new purchase.

"We're at a standstill," says Amanda Dean, 26.

Welcome to the dichotomy that is the U.S. housing market.

Sixyears since the start of the greatest housing collapse since the GreatDepression, one doesn't have to look very far to see signs of arecovery. Nationally, home prices are rising after more than a 30% dropsince mid-2006. More good news arrived Tuesday, as the Standard & Poor's/Case-Shiller home price indexreported third quarter prices were up 3.6% from a year ago andSeptember's 20-city index reached its highest level in two years.Foreclosures have slowed in most of the country after having decimatedhundreds of U.S. cities. Rather than being a drag on the U.S. economy,housing is now seen as a contributor to growth.

"With six monthsof consistently rising home prices, it is safe to say that we are now inthe midst of a recovery in the housing market," said David Blitzer,chairman of the index committee at S&P.

Yet there's a reasonhousing experts and economists won't yet pop the cork on the champagne.Just as the housing bust hit some areas harder than others, the recoveryhas been kind to some cities while unforgiving in others.

Despitethe national numbers, the recovery is uneven, and prices aren't risingeverywhere. The still-shaky economy fuels other concerns, particularlyrenewed threats of recession given the looming "fiscal cliff."

"It's almost a ZIP code by ZIP code recovery," says Stan Humphries, Zillow chief economist.

What's better now?

Zillow'sdata show that 183 of 252 markets nationwide hit bottom in the thirdquarter, after years of largely falling, and probably won't fall more.Prices were still falling in the other 69 markets, Zillow says. Yet on anational basis, 140 economists recently surveyed by Zillow predictedhome prices would rise an average 15.2% from the end of last yearthrough 2016, or from 2.3% to 3.4% a year.

More-bullisheconomists, including John Burns of John Burns Real Estate Consulting,see prices rising 5% to 7% a year through 2016. If so, they'd far exceedthe average 3.65% a year growth in prices that defined the nationalhousing market from 1988 to 2000 -- before the housing bubble started toform, Zillow says.

Burns argues that the housing sector has more tailwinds than headwinds and recent data have been upbeat.

Case-Shiller'sindex of 20 leading cities showed September prices up 3%year-over-year, with increases in 17 of the cities on an annual basis,led by Phoenix at 20%, annual prices largely flat in Atlanta and down inChicago and New York.

Sales of existing homes are also up, by 11%in October from the same month last year. Meanwhile, the supply ofhomes for sale has fallen to its lowest level in a decade, the NationalAssociation of Realtors says. That should help prices. New home salesare also doing better. After touching a record low in 2011, theyincreased 4% in the third quarter from the second, IHS Global Insightreported.

Beyond the sales and price numbers, the housing market has some strong drivers, economists say, including:

Affordability. Housing is the most affordable it has been in decades.

Creditthe fall in home prices and low interest rates. The U.S. average for a30-year fixed mortgage hit a record low of 3.31% as of Nov. 21, FreddieMac says.

Even Robert Shiller, the famed Yale University economistwho helped create the Case-Shiller index, says it's a good time to buy,assuming someone really wants to be a homeowner vs. a renter: "It'svery affordable if you want that."

Nationally, home affordabilityhas improved an average of 35% since the 1985-2000 period, Zillow says,based on home price and income data in 143 major U.S. markets. Consumersnow spend an average 13% of their monthly gross incomes on mortgagepayments vs. 20% historically. In mid-2006, at the height of the housingboom, it was 24%.

Alison and Nicholas Arnold of Wilmington, N.C.,recently bought their first home: a four-bedroom, 3.5-bath home for$372,000. Their market suffered a 31% decline in home values in the pastfive years, Zillow data show.

The lower home prices and goodinterest rates enabled the couple to buy such a big home, says AlisonArnold, a 28-year-old health coach.

"We wanted something we could grow into," she says.

Prices. Rising prices are convincing buyers that it's time to act.

Buyersthink "they have to rush in or they'll miss the bottom," says Liz AnnSonders, Schwab's chief investment strategist. Sonders says thecombination of low interest rates and rising prices has created the"inflection point" in the market where things stop getting worse andstart getting better.

"Consumers now recognize that houses are notgoing to get cheaper tomorrow," says Martin Connor, chief financialofficer of home builder Toll Bros.

Jose Frausto, 37, asecond-grade school teacher in Whittier, Calif., says he timed his firsthome purchase just right. The lifelong renter, along with his wife,Gabriella, 35, recently bought a $343,000 four-bedroom, one-bath home.

TheFraustos started shopping in late spring. They lost 10 home bids tocash buyers and investors. By the time they purchased, similar homes hadrisen in price by $10,000, Jose Frausto says. Median home prices in thearea fell 36% from 2006 through 2010, DataQuick data show.

"I think I got in at the right time," Jose Frausto says.

Evenif home price gains slow from their current pace, the fact that they'renot falling will help more buyers get into the market, says GlennKelman, CEO of online brokerage Redfin.

Stronger economy.The nation's unemployment rate dropped to 7.9% in October from its peakof 10% in the fall of 2009. Employed people buy homes and are lesslikely to default on home loans. Stock prices are up despite recentjitters about the fiscal cliff. The Conference Board reported Tuesdaythat consumer confidence in November was at its highest level in 4 1/2years and that 6.9% of those surveyed said they plan to buy a housewithin six months. That's the highest percentage in two years.

Asthe economy improves, so does the pace of how quickly people formhouseholds, which drives housing demand. At the depth of the financialcrisis in 2008, household formation fell to one-fourth its historicallevel. Now, it's clawed back to about half its historical level, sayseconomist Humphries.

Some of those new households are likely to behome buyers instead of renters, given the rising cost to rent and thediminished cost to own, says Jed Kolko, chief economist of real estatewebsite Trulia.

In 100 large metros, the average cost of owning ahome is now 45% cheaper than renting, Kolko's data show. Thatcalculation considers the tax benefits of owning and assumes thatsomeone lives in the house for seven years.

Near the height of thehousing bubble six years ago -- when home prices and mortgage rateswere far higher -- it was 13% cheaper to rent than to own, Kolko'sanalysis shows.

What's ahead?

Despite signs ofstrength, housing analysts who fear continued weakness say the market'sgrowing strength lacks durability. Indeed, some economists worry thatprices may resume falling if the U.S. suffers from the slowing globaleconomy or the European debt crisis, or falls into recession from thecombination of federal tax increases and spending cuts on tap inJanuary.

"While there's a good chance prices will go up from here,I'm still not ready to call the bottom," Shiller said in a recentinterview with USA TODAY. He has repeatedly expressed concerns that homeprices won't rise much for years or could even fall, given a bigeconomic shock."There's such wishful thinking that it's all fixed. ... Wehave a lot of headwinds."

Among his worries:

• Underwater homeowners.Nationwide, 45% of the almost 50 million homeowners with a mortgagehave less than 20% equity in their homes, CoreLogic data show.

Toget the best interest rates on a mortgage, 20% down payments are oftenthe norm. If people can't sell homes and walk off with enough money toput down on a new home -- plus pay a Realtor's commission -- they won'tsell, says Mark Hanson, an adviser to professional investors on housingand mortgage issues. If they don't sell, they won't buy.

FederalReserve Chairman Ben Bernanke, in a Nov. 15 speech, also noted "signs ofimprovement" in most parts of the country, but he added that thehousing market is "far from being out of the woods." He said tightcredit conditions might be one of the culprits, arguing that "overlytight lending standards" may be preventing creditworthy borrowers frombuying homes, thereby slowing the revival in the housing market.

• High delinquency rates.Some markets are also still deeply mired in the foreclosure crisis.Nationwide, 11% of mortgages were 30 days or more delinquent or inforeclosure as of September, data from mortgage tracker LenderProcessing Services show.

But in some states, those percentagesare far higher, including Florida at 21% of loans, New Jersey at 16%,New York and Illinois at 14% and Maryland at 13%. In all those states,foreclosures must go through the courts, so they take months longer tocomplete than in states where court approvals aren't required.

Those foreclosure pipelines will "weigh on the market" in those states and cities, economist Kolko says.

• Slight shifts in surging markets.Signs of cooling are emerging in some of the hottest markets, includingPhoenix and Las Vegas, which were among the hardest hit during theforeclosure crisis.

Of 100 of the largest metropolitan regions,Phoenix posted the biggest price gain in September with a 22%year-over-year jump, CoreLogic data show. Las Vegas came in fifth withan almost 11% increase. Both cities have seen strong interest frominvestor buyers, who are turning single-family homes into rentals.

ButOctober single-family median sale prices were flat after eight monthsof increases, the Greater Las Vegas Association of Realtors says. InPhoenix, big investors are showing less interest as bargains becometougher to find, says Mike Orr, real estate expert at Arizona StateUniversity.

Hanson warns that the shifts in Phoenix, Las Vegas andparts of California foreshadow the beginning of the nation's "hangover"and lack of "durability" in this year's recovery. He says sales volumewill fall off as investors, who have gorged on foreclosures for the pastyear, back off in the face of rising prices and limited supplies ofhouses for sale.

In the past year, the Fed has pushed 30-year mortgage interest rates down from above 4% to just over 3%.

That'spersuaded many fence-sitters to buy, says Steven Ricchiuto, chiefeconomist at Mizuho Securities. He, too, worries that demand mightfalter once the fence-sitters are gone, given the nation's still-highunemployment rate at 7.9%.

"After a while, you run through those people and there's no one to follow them up," Ricchiuto says.

Challenges for buyers

In the meantime, shoppers such as police officer Vance are navigating housing markets that have seen some fast changes.

WhenVance started shopping, she'd get 10 new listings to view each week inher $160,000 price range. But in recent months, she got just two orthree.

Given fewer foreclosures and high investor demand, theSacramento area had just a 1.9-month supply of homes for sale in Octobervs. the six-month supply that Realtors generally consider to be abalanced market. As a result, Sacramento prices were up almost 7% inSeptember year-over-year, CoreLogic says.

Vance is finally undercontract to buy a home. But instead of getting one with three bedrooms,she's gone with two, says Rob Baxley, her Realtor. He's had only oneother buyer this year who had to put in more offers to win a home, andhe sees no let-up in competition for lower-priced homes.

"The market is getting tighter and tighter. For buyers in that price range, it's miserable," Baxley says.

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