Austin's Real Estate Market Enters Prolonged Correction Phase as Inventory Surges and Buyer Activity Slows

The Austin real estate market continues to reflect the consequences of sustained elevated interest rates, economic uncertainty, and shifting buyer behavior. As of Wednesday, July 9, 2025, the number of active residential listings stands at 17,657, down 419 from the recent high of 18,076 reached on June 27. Despite this slight dip, inventory levels remain historically elevated, and 57.2% of all active listings have recorded at least one price reduction. This indicates an environment where sellers are struggling to meet buyer expectations, and price discovery remains an ongoing process.

The market's Activity Index currently registers at 19.6%, down from 23.2% in July 2024, a decline of 15.4%. Months of Inventory (MOI) has risen to 6.26 from 5.33 year-over-year, an increase of 17.6%. This shift further confirms the continued pivot toward buyer market conditions, with inventory accumulation outpacing transactional velocity.

Cumulative new listings from January through July have reached 30,550, which is 15.8% above the 25-year average. However, this positive supply metric is offset by persistently weak demand. Year-over-year, new listings are down by 3.2%, and pending sales are notably sluggish. Pending listings sit at 4,307, down 5.7% compared to the same time last year. More critically, cumulative pending contracts year-to-date are down 15.3% year-over-year and sit 7.3% below the long-term average.

The widening chasm between listings and contracts is evident in the new listing-to-pending ratio. The current monthly ratio stands at 0.52, while the year-to-date ratio sits at 0.67—well below the historical 25-year average of 0.81. This imbalance is responsible for much of the increase in months of inventory, as sellers continue to enter the market faster than buyers are writing offers.

Market absorption, measured by the Sold-to-Active Ratio, remains weak at 17.7%, compared to a historical average of 31.92%. Additionally, the Market Flow Score (MFS), which measures overall market momentum on a 0 to 10 scale, is currently 5.06—well below the long-term average of 6.61. Together, these figures further emphasize the softness in market turnover and demand strength.

In terms of sales activity, the number of sold properties for July to date is 2,634. Cumulatively, 17,704 homes have sold between January and July, representing a year-over-year drop of 5.7%, but remaining 6.6% above the 25-year average. When adjusted for population, the trend is more concerning. There have been 694 sales per 100,000 residents so far this year, down 8.0% from last year and 21.3% below the historical average. Per-agent sales productivity has also taken a hit, with 952 sales per 1,000 Realtors, down 1.6% year-over-year and 25.2% below the long-term norm.

Pricing data reveals that the market correction has not yet found its bottom. The average sold price is now $596,400, which is a decline of $85,539 or 12.54% from the peak of $681,939 reached in May 2022. Median prices tell a deeper story. The current median sold price is $452,500, down $97,500 or 17.73% from the peak of $550,000. Compared to prices from 36 months ago, the current median is down 12.14%, suggesting that homeowners who purchased during mid-2022 are likely underwater in today’s market.

Notably, price compression is disproportionately affecting the lower end of the market. From July 2024 to July 2025, homes in the bottom 25th percentile saw price declines of 4.97% and price-per-square-foot reductions of 4.98%. In contrast, the top 25th percentile of the market only experienced a 0.31% decline in price and 0.80% reduction in price per square foot. This reflects the increased sensitivity of entry-level buyers to mortgage rate fluctuations, as well as the oversupply of affordable new construction inventory in outer suburban areas.

Appreciation trends across the region show uneven impacts. Thirteen cities recorded year-over-year price gains, while seventeen posted declines. This city-level fragmentation reinforces that localized demand and supply dynamics remain critical when advising clients.

The long-term trajectory for Austin’s housing market still offers optimism, but with caution. Using the 25-year compound annual appreciation rate of 5.004%, a home purchased today at the current median of $452,500 would take approximately 50 months—or until August 2029—to regain its previous peak value of $547,996. This projection assumes the market has already hit bottom, which is still uncertain.

In summary, July 2025 continues to confirm a prolonged correction in the Austin housing market. Elevated inventory, stagnant pending volume, declining pricing, and widening supply-demand mismatches characterize current conditions. Buyers hold significantly more leverage, particularly in neighborhoods with slower absorption rates. Sellers must now adjust not just pricing expectations but also marketing and timing strategies if they hope to attract qualified buyers in a market that increasingly favors caution and selectivity.

Scroll down to view the full Austin Daily Real Estate Briefing PDF for July 09, 2025.