A single family home is shown for sale and in escrow in San Marcos, California.

Mike Blake | Reuters

Homebuyer demand was strengthening markedly just before COVID-19 began its spread across the U.S.

Pending home sales, which measure signed contracts on existing homes, rose a stronger than expected 2.4% in February compared with January. Sales were  up a steep 9.4% annually, according to the National Association of Realtors. That is the highest pace in exactly three years.

“February’s pending sales figures show the housing market had been very healthy prior to the coronavirus-induced shutdown,” said Lawrence Yun, NAR’s chief economist. “Numbers in the coming weeks will show just how hard the housing market was hit, but I am optimistic that the upcoming stimulus package will lessen the economic damage and we may get a V-shaped robust recovery later in the year.”

Regionally, pending home sales in the Northeast rose 2.8% for the month and were 5.9% higher than a year ago. In the Midwest, they increased 4.5% monthly and 14.9% annually.

Pending home sales in the South were up just 0.1% monthly, but 7.1% annually. In the West, where home prices are highest, sales grew 4.6% for the month and jumped 10.8% from a year ago.

The spring housing market was set up to be one of the best since the last recession. Closed sales of existing homes  in February jumped 7% annually to the highest level since February 2007, according to the National Association of Realtors. Those closings were based on deals made in December and January. Signed contracts to buy newly built homes also soared in February, up 14% annually.

While it is impossible to know exact numbers, one estimate is that home sales this spring will drop 35% annually, according to Capital Economics. The market was already struggling with record low inventory, and now some sellers are de-listing their properties. They either don’t want people touring their homes or don’t wan to sell into a down market. 

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