Jane ..I bet if you take your measurements you will find you have lost inches. As fat turns to muscle it takes up less space. we all know a pound is a pound is a pound..but if you put a pound of fat next to a pound of muscle..the muscle is lean & smooth..the fat takes a larger space & is lumpy & well FAT!
I talked to a friend of mine that is a runner. He told me that he reached his goal weight but when he became a serious runner he actually gained weight..muscle weight..
So your measurement of less body fat I would say is the product of losing fat & gaining muscle!!!