Sales fell 37.5 percent year-on-year to 34,669, the second-lowest number since the series began in January 2007 and the 12th straight month of declining sales, figures from the National Statistics Institute (INE) showed.
Joaquin Garcia, who works in his father's small real estate firm in Benalmadena, a resort near Malaga, said the business was only selling a third of the properties it was shifting during Spain's property bubble that burst at the start of 2008.
"People are waiting to see if prices continue to fall. There is interest but the banks are not offering credit. The few deals we've done have all been cash buyers, Spaniards from the interior buying second homes," he said.
Banks have set tight conditions and higher interest rates on new mortgages than for existing borrowers, while Spain's shaky economy with unemployment at one in six workers is further undermining an already over-supplied market.
Buyers choose to wait for the bottom
Official data shows house prices belatedly responding to the sales freeze, with a 6.8 percent year-on-year drop in the first quarter. However, private surveys show far larger drops which are persuading buyers to wait.
Garcia said Spanish sellers had cut prices by around 15 percent in the last six months, while British sellers were successfully selling homes along the high-rise beachfront because they have been willing to slash prices by up to 30 percent this year, compensated by gains on changing their euros into the weak pound.
After surging more than anywhere else in Spain over the last decade, spawning a massive increase in developments, prices in Malaga province officially fell 10.7 percent year-on-year in the first quarter.
British builder Taylor Woodrow said there was still plenty of interest from Britons in its Spanish developments, although interest had markedly swung towards the cheaper end of the market, properties costing less than 250,000 euros.
February's fall in house sales followed a 38.6 percent drop in January and continued falls of over 25 percent in almost every month since INE started publishing the figures at the start of 2008.
INE data showed sales of existing houses fell 45.2 percent while deals on new homes were 29.3 percent lower year-on-year, and 8.7 percent down on a month earlier.