By Leah Schnurr and Jilian Mincer
NEW YORK, May 28 (Reuters) - Kate Carpenter and her husband waited for two years before sensing the time was right to look to buy a home in the suburbs of New York.
"This is the first time homes are at an affordable point," said the freelance writer, 35.
She hopes to move her two young daughters out of their rented New York City apartment soon, taking advantage of record low mortgage rates and signs the slump is over.
Six years after the housing market began its slide, dragging the U.S. economy into recession, this year's spring season -- traditionally the busiest period for home sales -- is shaping up to be the strongest since the crash.
Sales rose more than 10 percent in April from a year earlier and may end the year up by as much as 13 percent, according to the National Association of Realtors.
Prices, which plunged by a third from 2006 according to some measures, are rising in some cities. Realtors report bidding wars, albeit more modest ones than during the bubble years, and buyers are snapping up homes much more quickly than only a few weeks ago.
"We have more buyers than we have houses to sell," said April Bolin, a realtor in Riverside, California, considered one of the epicenters of the U.S. housing crash.
"We have multiple bids all the time. I recently sold a property that had 10 offers in three days," Bolin said.
A reminder of how damaged the market remains: That contested condominium sold for the asking price of $173,000, less than half of what it fetched at the peak of the bubble.
Even if existing home sales this year touch 4.8 million, the top end of the NAR's forecasts, that compares with more than 7 million in 2005, before the crash.
"We're guardedly optimistic," said Ron Phipps, a broker at Phipps Realty in Warwick, Rhode Island, a state hit hard by the 2007-09 recession. "We've seen some really good signs. We just want them to be sustained."
WORKING OFF THE OVERSUPPLY
One of the most significant signs of recovery is the fall in the bloated inventory of homes on the market. Nationally, it has fallen to about six-months' supply, usually considered a healthy market, down from more than nine months in April of last year.
Agents attribute some of the quick drawdown to a broadening of the kind of buyers getting into the market - homeowners looking to upgrade, first-time purchasers and retirees as well as the cash investors who ventured in earlier and growing numbers of Wall Street funds betting on juicy rental returns.
Some of the cities looking at a potential inventory shortage were among those hardest hit by the crisis, including Phoenix and Miami, because investors have already swooped on many homes. In Sacramento, California, supply has shrunk to just 1.1 months' worth, according to data firm RealtyTrac.
"We don't have a lot of product, and we have a lot of eager buyers," said Donna Evers, an owner of Evers & Company, a real estate company in the greater Washington, D.C. metropolitan area, one of the hottest spots in the recovery so far.
A five-bedroom house that needed a lot of renovation drew 11 offers within three days and eventually sold for $250,000 over the asking price at $1,350,000, Evers said.
"Prices are building pretty fast," said the 30-year veteran of the U.S. property market.
The market still faces big obstacles, not least a large number of homeowners whose properties are worth less than their mortgages or who are behind on their payments. In March, data firm CoreLogic estimated that for every two homes sold, there is one that could yet be foreclosed.
A setback in the still fragile U.S. economic recovery could also scare away potential buyers.
MORTGAGE LENDING STILL TIGHT
Another risk to the recovery: Despite record low interest rates, lending conditions remain very tight for anyone who cannot show a high credit score and satisfy often highly detailed demands from banks for proof of their financial standing.
"The cruel irony is that during the housing boom, we were giving mortgages to anybody with a pulse," said Guy Cecala, publisher of industry newsletter Inside Mortgage Finance. "Now we aren't willing to give a mortgage to anybody but an Olympic athlete. Somewhere in between there's an appropriate balance."
Mortgage originations by U.S. banks were flat in the first quarter compared to the last three months of 2011 although they were up from a year earlier, according to the Federal Deposit Insurance Corp., a U.S. bank regulator.
Bankers, smarting from a $25 billion settlement over shoddy foreclosure practices, complain about uncertainty as regulators draw up new mortgage rules. The Federal Reserve said in April some community banks have given up on mortgages altogether.
But comments from major lenders Bank of America and Wells Fargo & Co suggest they could soon start beefing up lending again.
Bank of America Chief Executive Brian Moynihan told investors last week that his bank is adding loan officers as it looks to recover lost market share.
Wells Fargo, which now makes more than one in three U.S. mortgages, is also looking to grow.
"Now, we fully expect some bumping along here as the national economy has its own fits and starts and the like. But we see some real continued improvement," Mike Heid, head of Wells Fargo's mortgage unit, told investors last week.
Wells Fargo wrote $129 billion in mortgages in the first quarter, up from $120 billion in the fourth quarter and $84 billion a year earlier.
Still, demand has been far stronger from homeowners trying to bring down the cost of their existing mortgage than from prospective buyers. Last quarter, refinancing accounted for 76 percent of all mortgage applications.
Some of those who can buy are moving fast.
Twenty-six-year old John, who asked that his family name not be published, signed a contract on a three-bedroom property in Ponte Vedra, Florida, just a day after seeing it.
"There was another family that put in a bid on the same day, so we offered a little bit more than we were originally planning because we just wanted to get it off the market," he said.
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