According to data released Tuesday by the National Association of Realtors, the median existing-home price for the first quarter in Chicago, which included all transactions from January through March, was down 25.6 percent --$185,600 from $249,600 the year earlier period.  

The national median price also dropped for the most recent period, down 13.8 percent to $169,000 compared with $196,100 a year ago. The Midwest experienced a similar trend.  Median price for the region dropped 6.8 percent in the first quarter from the same period in 2008, to $132,400 from $142,100. 

“With all these foreclosures and short sales that are sold typically at a 40 percent discount it’s really pulling those medians down,” said Walter Molony, a spokesman for the Realtors association. 

Total existing-home sales fell across the board as well. 

Sales for the first quarter in Illinois were down 21.7 percent, to 157,000 units from 200,800 a year ago.  Indiana experienced an even bigger decline, down 33.4 percent to 89,200 units from 133,900 units the year prior period. 

At the national level existing-home sales were down 6.8 percent to 4.59 million units. First-time buyers accounted for half of all housing purchases during the quarter. 

Molony said looking at the raw numbers is “pretty ugly,” but since the market always heals from the bottom up, the fact that these lower median prices are attracting first-time buyers could mean positive things in the long run. 

“We are looking for the market to stabilize in much of the country by the end of the year,” Molony said. “These high levels of first time buyers are a positive indicator in terms of traffic because as more of those folks suck up the inventory that’s out there it will be easier for people to sell and trade up.” 

Lawrence Yun, chief economist with the association, said in a press release that close to 455,00 buyers purchased their first home this winter, adding that they "are critical for a housing recovery.”  He believes this is only the first wave of new buyers coming into the market.

Another reason for the increase in first-time buyers is that they can secure mortgages at historically low levels -- a 30-year fixed rate dipped under five percent last month. That means a monthly savings of $474 on interest payments for a $185,600 loan (the median price for a Chicago house).

Tim Freeman, a broker with Coldwell Banker Real Estate LLC in Chicago, called these trends generally in line with what his office has seen. 

“The current lending environment and the national programs like the tax credit have spurred new buyers much more than middle to the higher end of the market,” Freeman said. 

Freeman said he doesn’t see too many first-time buyers because his office deals with more expensive properties.  However, the high activity by first-time buyers could mean good things for the future of the housing market at all levels. 

“I anticipate the ripple effect to occur where we should be seeing more activity in the middle to higher end because if the new buyers are buying that kind of pushes everybody up,” Freeman said. “There’s a desire to move.”