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, the Realtors' 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."
Given that the pending sales numbers are based on signed contracts, it is possible some buyers may pull out of their deals, worried about their personal finances. Others who may have lost income or employment may no longer qualify for a mortgage.
"The cancellation and delisting activity have been not dramatic in March, though [there were] more changes last week. The situation is fluid, but I would say 10% cancellation at most. New York, New Jersey, Pennsylvania and California could have a higher figure," said Yun.
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 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 delisting their properties. They either don't want people touring their homes or don't want to sell into a down market.