The average sale price of homes sold in the District hit the highest level in history during March -- $122,400, an increase of 42 percent over the average of a year earlier -- but the dramatic increase was based largely on the sales of higher-priced houses, city assessors report.

The average price for homes sold in the first three months of 1981 also was the highest quarterly figure ever recorded -- $112,000.

At the same time, however, the total number of sales transactions continued to decline sharply. Sales of single-family houses in March were off 34 percent from a year earlier, and were down 26 percent for the first quarter.

Condominium sales were up 27 percent in March from 1980 and were up by 13 percent for the first three months. Condos widened their share of the total residential market to 52 percent of all sales during the first quarter, compared with a market share of 40 percent during January through March of 1980.

Two city assessment officials who complied the new sales data, George B. Altoft and Charles Horwitz, said the first-quarter results illustrate dramatically how high mortgage rates are affecting the real estate market here.

On the one hand, Horwitz said, "you have an entire segment of the market that is continuing with very little trouble" -- the upper-bracket home sales where people take care of their own financing or buy for all cash.

On the other hand, he said, sales have plummeted in the middle ranges of the market, where people are more dependent on the availability of mortgage money at a reasonable cost at banks or savings and loan associations.

March's $122,400 average reflects the growing percentage of large luxury houses changing hands in a housing market that is shrinking, Altoft said. Homes in the $500,000-and-up class -- particularly in Northwest neighborhood such as Kalorama, Massachusetts Avenue Heights and Forest Hills -- no longer are rarities, as they were as recently as 18 months ago.

With housing sales in the District now down by about 50 percent from where they peaked in 1978, the regular presence of $500,000 to $750,000 houses in the sales pool every month "distorts our averages upwards," Horwitz conceded, "but that's where the activity is occuring."