The Windy City housing market appears to be gradually digging itself out of the Grand Canyon-sized price crater created by the Great Recession.

An analysis of existing home-sales activity by the RE/MAX Northern Illinois real estate network showed signs of stabilizing in May as transaction activity rose and average market times declined even though home prices in some areas were still under downward pressure.

RE/MAX Northern Illinois reported that home prices in Chicago were on the rise in May, with the average price rising 6 percent to $290,147 and the median increasing 2 percent to $225,000.

Prices of detached homes showed particular strength, with the average price rising 25 percent compared to May 2009, an indication that more homes in the middle and upper segments of the market were changing hands, said Jim Merrion, regional director of the RE/MAX Northern Illinois, which recorded a 36 percent increase in May sales in the seven-county metro area.

And, homes in the Chicago metro area lingered on the market for an average of only 164 days, rather than the average of 184 days recorded a year earlier.

“Buying conditions remain favorable with mortgage interest rates hovering at historic lows combined with affordability conditions that essentially give buyers more bang for their buck when purchasing a home in today’s market,” said Mike Onorato, president of the Illinois Association of Realtors (IAR).

In mid-June, Freddie Mac’s Primary Mortgage Market Survey reported that benchmark 30-year fixed-rate mortgages averaged 4.75 percent. A year ago, the 30-year fixed mortgage average was 5.38 percent.

“Both 30-year and 15-year mortgage rates continue to be at near record lows, providing significant incentives for homeownership,” said Dr. Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory (REAL) of the University of Illinois.

IAR reported that Chicago-area home sales rose 33.6 percent to 7,580 single-family homes and condominiums sold in May compared with 5,673 homes sold in May of 2009. It was the 11th consecutive month for home sales gains.

“One sign that the market is becoming healthier is the continued decline in the percentage of homes sold that are distressed properties, a category that includes foreclosures and short sales,” Merrion noted.

According to sale information compiled by Midwest Real Estate Data, LLC, 33 percent of May sales involved distressed properties, down from 35 percent in April and 42 percent in March of this year. Nearly 2,500 Chicago-area distressed properties were sold in May, of which 71 percent involved foreclosures, with short sales accounting for the other 29 percent.

The average price of all detached homes sold increased nearly 2 percent to $259,573 when compared to May of 2009. In April, the average price was up 4 percent.

Prices of condominiums and townhouses didn’t hold up quite as well. The average sale price in May was $233,564, down 5.2 percent from $246,467 a year earlier.

“Well presented homes are clearly selling faster when priced competitively, but prices continue to face pressure in most market areas, primarily because the inventory of unsold homes remains high and the sizable number of distressed properties on the market limits the pricing power of sellers,” Merrion said.

Still, challenges remain, particularly with the labor market.

“For homes to sell, jobs need to be created in order for consumer confidence to escalate,” said Mabel Guzman of Century 21, S.G.R., and president-elect of the Chicago Association of Realtors.