Austin Housing Market Update: Short Sales Rise, New Construction Outpaces Resale
Published | Posted by Dan Price
Austin Housing Market Sees Rise in Short Sales as Buyer Demand Favors New Construction
As of May 26, 2025, the Austin-area housing market is showing signs of shifting dynamics, with distressed property listings gaining traction and new construction continuing to outperform resale homes in buyer demand. Two critical data points underscore these trends: the rise in active short sale listings and the widening gap in Activity Index between resale and new construction homes.
Short sale activity has reached a notable milestone. There are currently 41 active short sale listings across the Austin-area MLS, accounting for 0.24% of total active residential inventory. While that may appear small in percentage terms, it is the largest number of short sales seen in recent cycles. The growing presence of short sales indicates increasing financial pressure on some homeowners, especially in a market where affordability remains a key concern. What’s even more striking is the absorption rate for these listings. With 23 of the 41 short sales under contract, the segment has an Activity Index of 35.94%, well above the overall market’s 22.22%. This suggests that distressed inventory is moving quickly, likely due to pricing that reflects significant discounts from original list prices. The average short sale listing is priced at $395,360, with an average price drop of $35,043, or -9.4%. The average pending contract for a short sale is even lower, at $329,302.
Meanwhile, resale homes continue to represent the bulk of the market, with 13,304 active listings accounting for 76.7% of total inventory. However, resale properties only make up 59.6% of pending transactions, translating to an Activity Index of just 18.16%. This lag in demand relative to supply highlights a cooling trend in the resale sector, especially when compared to the performance of new construction. Builders currently have 4,033 active listings, or 23.3% of the market, but command 40.4% of all pending transactions. The result is a new construction Activity Index of 33.16%—nearly double that of resale.
Drilling deeper into the data, under-construction homes have the strongest demand, with an Activity Index of 38.28%. Completed new homes follow with a 31.15% index, indicating that buyers are responding strongly to builder incentives, modern amenities, and the promise of turnkey convenience. In contrast, updated or remodeled resale homes carry an Activity Index of 17.27%, while historic and see-remarks listings lag further behind.
Together, these trends reveal that today’s buyers are gravitating toward competitively priced, new or distressed properties. The resale sector—especially homes without updates or modern finishes—faces a slower absorption rate, which may lead to further price adjustments in the months ahead.
What is the current number of short sale listings in the Austin housing market?
As of May 26, 2025, there are 41 active short sale listings in the Austin-area Multiple Listing Service (MLS). This number reflects a notable increase compared to recent months and represents 0.24% of all active residential inventory. While the percentage may appear small, it's significant given the historical rarity of short sales in Austin’s post-2012 market cycle. The uptick in short sale listings suggests that a growing number of homeowners may be facing financial hardship or underwater mortgages—where the home’s current market value is less than the remaining mortgage balance. This trend often emerges during extended periods of price correction or in areas where inventory levels rise faster than demand, putting downward pressure on home values. It’s worth noting that short sale listings tend to grow slowly at first, then accelerate if pricing declines continue and more owners become motivated—or forced—to sell at a loss with lender approval.
How fast are short sale listings selling compared to traditional listings?
Short sale listings are currently selling at a much faster pace than traditional resale listings. Of the 41 active short sales in the market, 23 are already under contract, resulting in an Activity Index of 35.94%. This index measures buyer absorption by dividing pending listings by the total number of active and pending listings combined. For comparison, the overall market Activity Index is 22.22%, and the resale sector lags further at just 18.16%. A higher Activity Index indicates stronger buyer demand and faster turnover. Short sales are often priced below market value to reflect lender-required approval timelines and property condition. In this case, the average list price for active short sales is $395,360, with an average price drop of $35,043, or 9.4%. Buyers are capitalizing on these discounts, pushing pending sale prices down even further to an average of $329,302. These figures confirm that price-conscious buyers are aggressively targeting short sales, likely due to affordability constraints in other segments of the market.
What is the difference in buyer demand between resale and new construction homes?
The gap in buyer demand between resale and new construction homes continues to widen in May 2025. Resale listings dominate the inventory landscape, making up 13,304 of the 17,337 active listings—equivalent to 76.7% of total inventory. However, resale homes account for just 59.6% of pending sales (2,953), reflecting softer demand relative to supply. This mismatch results in a low Activity Index of 18.16%, suggesting that resale homes are turning over slowly despite their market presence. In contrast, new construction homes represent only 23.3% of active listings (4,033), but they account for a striking 40.4% of pending transactions (2,001). That results in an Activity Index of 33.16%—nearly double the resale figure. This discrepancy highlights a clear market preference: buyers are gravitating toward new construction, likely due to builder incentives, contemporary floor plans, energy efficiency, and the appeal of move-in-ready options. The data indicates that even with more resale inventory available, it is new construction that is absorbing demand at a significantly faster pace.
Are updated resale homes performing better than older ones?
Updated or remodeled resale homes are performing modestly better than the average resale property, but still trail far behind new construction in terms of buyer demand. There are 1,020 active listings classified as updated or remodeled, with an average list price of $989,128 and an average price drop of $83,506 (-7.2%). Out of these, 213 are under contract, leading to an Activity Index of 17.27%—slightly below the overall resale index of 18.16%. While updates such as kitchen remodels, flooring, or energy-efficient upgrades may help attract attention, they don’t seem to be enough to overcome broader buyer preferences in the current market. By comparison, under-construction homes have an Activity Index of 38.28%, and completed new construction homes sit at 31.15%. These figures suggest that while renovated resale homes offer some appeal, they are not competing effectively against brand-new homes with builder-backed warranties, design incentives, and streamlined purchase processes. Additionally, many buyers in the current market are risk-averse and prefer properties with no deferred maintenance—something only new builds can fully guarantee.
Why are buyers favoring new construction homes?
Buyers are favoring new construction homes for several key reasons tied to value, convenience, and market dynamics. First, builders are offering strong financial incentives, including closing cost assistance, interest rate buydowns, and design upgrades, which are often not available on resale homes. These perks significantly improve affordability and lower upfront costs, especially as mortgage rates remain elevated. Second, new construction offers modern floor plans, energy-efficient appliances, and lower ongoing maintenance—features that appeal to today’s buyers who prioritize convenience and long-term cost savings. Third, data shows that new construction inventory is being absorbed more rapidly than resale inventory. Under-construction homes have an Activity Index of 38.28%, the highest among all property types. Even completed new homes have an Activity Index of 31.15%, confirming consistent buyer demand across the segment. Finally, in an environment where resale listings are seeing price reductions and slower turnover, buyers may see new construction as a safer investment with fewer unknowns and more stable pricing structures. The numbers support this trend: despite making up just 23.3% of active listings, new builds account for 40.4% of pending transactions in the Austin market.
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