Increased demand and an ongoing slowdown in homeowners listing their houses for sale continue to force selling prices up in the Buffalo Niagara region.

A big drop in inventory in March drove the median sales price higher, according to the latest data from the Buffalo Niagara Association of Realtors. The number of homes for sale fell 19.8 percent from a year ago, down to 4,401.

That’s the lowest level for any month since February 2010, when the market was on a steady rise from the depths of the recession. The inventory has fallen by at least 15 percent for each of the past 12 months, compared with a year earlier.

The cause is a combination of sales activity that drains the inventory and a drop in new listings that would normally replenish it. New listings fell 8.9 percent in March to 1,488. So far this year, they are down 6.1 percent to 3,810, and they’ve declined in 10 of the last 12 months.

Meanwhile, the demand among buyers is growing, as reflected in multiple offers for many homes and bidding wars above the asking price.

“This is the hottest spring market in five years in real estate in Western New York,” said Philip L. Aquila Jr., general manager of residential real estate offices for M.J. Peterson Corp. and former head of the regional multiple listing service.

“Multi-offers are flying in and out. The time on market is dropping. The listings are dropping because they’re selling fast.”

While the number of closed deals fell 3.9 percent in March from a year ago, to 648, it’s up by the same percentage so far this year, to 1,770.

Pending sales jumped 9.5 percent to 998. That’s the highest level for any month since last May and the third-highest since April 2010. And it’s up 27 percent from March 2011. So far this year, pending deals are up 1.8 percent, to 2,349. Pending sales refer to deals that have been signed but not completed. Home sales typically take about 60 days from contract to closing.

“It is now, right now, a true seller’s market,” Aquila said. “The sellers are in control because there are less listings, and the buyers are out like May flowers, because the rates are [low].”

In turn, the demand is propping up prices on a slow but steady climb. The median price of $117,750 in March was up 3.9 percent from a year ago and up 12 percent from two years ago. However, it’s been as high as $130,000 last June.

Similarly, the average price rose 0.7 percent to $139,177 and is up 10.8 percent from two years ago. But it’s down a notch from February and is well below its four-year peak of $158,299 last June.

“First, tightened inventory levels combined with strong demand are fueling price gains in many areas,” BNAR said in its report. “Second, consumer demand is shifting from distressed properties to conventional homes. Third, record-low mortgage rates and rising rents are supporting housing recovery.”

The activity means homes are spending 85 days on the market, down 9.6 percent from a year ago, while the inventory equals 5.3 months’ supply at the current pace, down 25.4 percent. The duration of the supply has fallen by at least 15 percent in each of the last 12 months and is now down to its lowest level for any month since February 2010.

“Things are going crazy. It’s a hot market. The action’s out there, and that’s what counts,” Aquila said. “It’s been increasing every year as we’ve come out of the recession.”

But he cautioned that “it’s not going to last” too much longer, because interest rates will likely start going up, “if not by the fall, certainly by next year.”

BNAR reports figures for all sales handled by Realtors, who are members of the trade group, through “arms-length” transactions in the eight-county area of Western New York, plus some sales in Monroe and Livingston counties.