Home prices are slowly rebounding in the Chicago area and other markets across the nation and a residential revival may not be far away, real estate experts say.

Freddie Mac’s Conventional Mortgage Home Price Index reported that home values in the five Midwestern states—Illinois, Indiana, Michigan, Ohio and Wisconsin—rose 0.5 percent in the first quarter of 2009.

That’s a projected gain of 1.9 percent in 2009 on an annualized basis. The first-quarter 2009 gain in home values compares with a prior decrease of 3.9 percent over the last 12 months in the five-state Midwest area, Freddie Mac said.

Midwest housing values are solid as a rock when compared with such states as California, Washington, Oregon and Hawaii, where values decreased 4.7 percent in the first quarter of 2009. Over the last 12 months, home values nosedived 21.2 percent in the Pacific Coast area.

“The improvement in house-price change from a steep decline to a more moderate one is consistent with other housing market data that point to the highest level of home-purchase affordability in at least 40 years and a stabilization in existing home sales and single-family construction in the first quarter, albeit at low levels of activity,” said Frank Nothaft, Freddie Mac vice president and chief economist.

Meanwhile, with Chicago’s downtown condominium developers are determined to move unsold inventory, and savvy buyers are finding that price reductions in the vicinity of 20 percent on new unsold units are garnering strong interest, said Gail Lissner, vice president of Appraisal Research Counselors.

Lissner noted that the price discounts have led to an uptick in sales in recent months especially among first-time buyers.

"Several factors come into play, including the $8,000 first-time buyer tax credit, the availability of Federal Housing Administration-insured financing with down payments as low as 3.5 percent, and the freedom from having to sell an existing residence,” Lissner said. Typically, first-time buyers are attracted to the current large inventory of condo units priced in the $250 to $350 per-square-foot range, Lissner said.

“One a resale basis, brokers are also reporting the best velocity for units priced under $200,000,” Lissner said. “Thus, for first-time buyers who are still employed and feel confident about their jobs, these are very attractive market conditions.”

On the other hand, the latest edition of Appraisal Research’s Downtown Chicago Residential Benchmark Report, noted that high-end brokers are reporting that luxury condominium buyers are being pinched by the recession.

“Their stock market losses are affecting their ability and desire to purchase real estate,” Lissner said. “And the higher interest rates being charged by lenders on jumbo mortgages (over $417,000) are not helping the situation either. Consequently, the pool of potential second-home buyers ***

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