March existing-home sales fell from February, but continue to outpace year-ago levels, while inventory tightened, according to the National Association of Realtors.

Total existing-home sales declined 2.6% to a seasonally adjusted annual rate of 4.48 million in March from an upwardly revised 4.60 million in February. However, sales are 5.2% above the 4.26 million-unit pace in March 2011.

Lawrence Yun, NAR chief economist, said the recovery is in the process of settling into a higher level of home sales as job growth, low interest rates, bargain home prices and an improving economy push demand in the market.

“The recovery is happening though not at a breakout pace, but we have seen nine consecutive months of year-over-year sales increases,” Yun said.  “Existing-home sales are moving up and down in a fairly narrow range that is well above the level of activity during the first half of last year."

Total housing inventory at the end of March declined 1.3% to 2.37 million existing homes available for sale, representing a 6.3-month supply at the current sales pace — the same as February. Listed inventory is 21.8% below year-ago levels and far below the record of 4.04 million in July 2007.

“We were expecting a seasonal increase in home listings, but a lack of inventory has suddenly become an issue in several markets with not enough homes for sale in relation to buyer interest,” Yun said.  “Home sales could be held back because of supply factors and not by demand — we’re already seeing this in the Western states and in South Florida.”

The national median existing-home price for all housing types in March came in at $163,800, up 2.5% from a year earlier. Distressed homes accounted for 29% of March sales (18% were foreclosures and 11% were short sales), compared with 34% in February and 40% in March 2011.

Foreclosures typically sold for an average 19% below market price in March, while short sales were discounted 16%.