Homes in Auckland, Canterbury and Westland are selling the fastest, at 31 days, while Northland homes are spending the longest on the market, at an average of 72 days.
Auckland in particular was selling very quickly, but the main problem now was the lack of homes for sale, she said.
In the past three years few new homes had been built, and the industry was not seeing a supply change in the short term.
"[So] if you've been holding off selling because you don't think you'll get the price you want, price levels now should give you confidence if you bring it to the market you will get what you're looking for.
"However, people aren't just selling for the sake of selling, so if you're living in a house already and you need to buy another one, this might get worse because you're thinking 'if things are selling that quickly I better find something to buy before I sell'."
In the past three years building consents have been at 65 per cent of long-term levels.
Just last week QV statistics showed house prices were also on the up, soaring past the 2007 peak.
The average house value in Auckland is $529,508 - 2.2 per cent above 2007. The Reinz figures mirrored these results, and found the national median house price reached a record high, of $370,000, up 1.4 per cent on March last year.
Auckland also recorded a record median price of $495,200, up 5.4 per cent on March last year, "reflecting the rising demand for housing in the city and the continuing shortage of available stock".
The figures showed the market was moving at an increasing pace, O'Sullivan said.
"Price is only one measure when it comes to looking at the overall state of the real estate market. Volumes are actually a really big indicator, and so is... days to sell."
"It's a big move from February that actually surprised me. I was sort of taking a bit of comfort with the figure being what it was in February that things were still relatively under control. It suggests the pace at which things are happening is really increasing."
O'Sullivan is quick to point out that the housing market is hugely seasonal, and March is traditionally a strong month with higher statistics.
"Because you've not got the distractions of December and January, summer holidays out of the way, weather's still good, no school holidays, there's no Easter, so it is generally a bigger month."
But she says across the country the total value of residential sales, including sections, was $3.35 billion in March, compared with $2.66 billion in February of this year, and $2.62 billion in March last year.
Of the 7330 properties to sell in March, 310 sold for more than $1 million, while 4085 sold for less than $400,000.
The March figures were "a significant milestone in terms of seeing confidence come back to the market and levels of transactions", she said.
ASB chief economist Nick Tuffley said the gradual increase in housing turnover in recent months was particularly evident in Auckland, while there was also some recovery in Canterbury.
"Underbuilding over recent years, combined with the housing shortage created by the earthquakes, have resulted in a very tight housing market in Auckland and Christchurch," he said. The tighter supply meant house price increases had outpaced those of the rest of New Zealand.
"We expect house prices will continue to lift over 2012 on a nationwide basis at a modest annual rate of around 5 per cent, with the increases likely to remain stronger in Auckland and Christchurch."
Tuffley said there had been a tentative recovery in residential building activity, with a pick-up in post-quake building activity from late this year likely to provide a further boost.
