U.S. sales of previously owned homes rose 3.4 percent in April, reversing three months of declines and suggesting a stabilization of the housing market, the National Association of Realtors said Tuesday.

Sales rose to a seasonally adjusted annual rate of 4.62 million units in April from a downwardly revised 4.47 million units in March. The result, based on closed contracts, surpassed a Bloomberg forecast of 4.61 million units and was the highest number of sales since May 2010. Sales were 10 percent higher than the April 2011 volume of 4.2 million.

Inventory rose 9.5 percent to 2.54 million homes on the market, but fell 20.6 percent from a year ago.

“A diminishing share of foreclosed property sales is helping home values. Moreover, an acute shortage of inventory in certain markets is leading to multiple biddings and escalating price conditions,” said Lawrence Yun, NAR's chief economist. He said traditionally strong markets like Washington D.C. had tight inventory, but cities hurt heavily by the housing crash, including Miami and Phoenix, were also expected to have price increases tied to lower supply.

But some housing experts caution that lower inventory can also mean that sellers are more reluctant to list their properties because of expected price erosion, and fewer homes on the market can discourage buyers, who have fewer options.

The national median home price increased 10.1 percent to $177,400 compared to the prior year. March prices had an upwardly revised annual price gain of 3.1 percent. It was the first instance of two-month price gains since June and July 2010.

Distressed sales accounted for 28 percent of April sales, down slightly from 29 percent in March and below 37 percent in April 2011.

First-time buyers accounted for 35 percent of purchases in April, up from 33 percent in March, but below the 36 percent in April 2011. Investors accounted for 20 percent of sales, virtually unchanged from 21 percent in March and 20 percent in April 2011.

“It is no longer just the investors who are taking advantage of high affordability conditions. A return of normal home-buying for occupancy is helping home sales across all price points, and now the recovery appears to be extending to home prices,” said Yun.

Northeast sales rose 5.1 percent on an annual basis and pricing rose 8.8 percent. Midwest sales rose 1 percent and prices rose 7.4 percent compared to prior year. Sales in the South rose 3.5 percent and pricing rose 8 percent. Existing homes in the West increased 4.4 percent and pricing rose 15.9 percent.