Rates Improve, but Market Momentum Slows
The October 20, 2025 Monday Touch Point opened with cautious optimism about interest rates. Conventional loans are hovering near 6.5 percent, and FHA and VA products are close to 6 percent. The 10-year Treasury dipped just under four percent, signaling potential for further downward movement in rates. However, despite this rate relief, buyer activity is not responding. With the federal government shutdown delaying key economic reports such as CPI, national market signals are muted, and once again, Austin’s local MLS data becomes our most important real-time indicator.
New Listing-to-Pending Ratio Signals Clear Slowdown
The most critical leading indicator right now is the new listing-to-pending ratio. At 0.52, the market is clearly contracting, with only 52 homes going under contract for every 100 new listings entering the market. That level falls deeply into cold market territory and confirms that demand is declining faster than supply. Weekly pendings dropped to just 181, one of the lowest readings since mid-2022, even as rates improved. This tells us that buyer hesitation is no longer just about affordability—it is about confidence and timing.
Inventory Surges to Multi-Year Highs
Active listings have climbed to 16,527 across the six-county Austin region, with 4,319 of those coming from new construction. Austin is now firmly on track to surpass 20,000 active listings by May 2026. This surge reflects a multi-year cycle: sellers who paused in 2023 have now re-entered the market, and investor-owned properties that were leased out are returning as resale. This wave of inventory is not a short-term fluctuation; it is part of a structural shift that is redefining the balance of power between buyers and sellers.
The Tale of Two Markets: New Construction vs. Resale
One of the most revealing insights this week came from the city of Kyle. When viewed as a whole, Kyle’s 29.4 percent activity index suggests a relatively healthy market. But segmentation tells a different story. New construction is absorbing at 37.9 percent and has only 3.5 months of inventory. Resale absorption drops to just 17.5 percent, with months of inventory nearly doubling. Builders are using aggressive incentives and rate buydowns to maintain absorption, while resale listings, priced without those tools, are struggling to compete. This is not an isolated case—this “two-market” phenomenon is now showing up across the region.
Leasing Market Hits Record Highs
The leasing market has now reached its highest level in Austin MLS history, with 7,685 active rental listings. Lease pricing has turned negative, with median lease rates down nearly 11 percent from peak levels. As more owners pivot to leasing when their home does not sell, inventory continues to balloon, creating more downward pressure on rents and extending days on market. For investors and would-be landlords, this is a critical warning: passive income assumptions must be re-evaluated.
Pricing Strength Concentrated at the Top
Despite the slowdown in demand, pricing has not collapsed across all segments. Instead, the market is splitting. The top 25th percentile of listings is outperforming the rest of the market, with average sold prices up 10 percent month over month and the median up 7.7 percent. The luxury sector continues to transact because those buyers are less rate-sensitive. In contrast, entry-level and mid-market price points are seeing longer list times and more price reductions. The sold-to-list price ratio has improved to 97.09 percent, but that improvement is heavily concentrated in specific segments.
Forecast for October: Demand Continues to Decline
Based on current absorption, October pending sales are projected to finish down approximately 8 percent year-over-year. New listings will likely come in flat, meaning that inventory growth is being driven by weakening demand rather than a surge in supply. This is a critical distinction: even though fewer homes are hitting the market, buyers are not stepping forward. This imbalance is what drives months of inventory higher and transitions the market into colder conditions.
Agent Strategy in a Market Shift
Dan’s closing message was clear: market conditions do not determine your success—your actions do. Sellers only control two things: price and condition. If a home is not perfect, it must be priced accordingly. Occupied listings should be launched no later than November 17, and vacant homes no later than November 21. This is the season where serious agents gain market share by leading with data, preparing clients with clarity, and moving decisively while competitors slow down.
Final Takeaway: Data Is Strength, Not Fear
This market is not good or bad—it is simply the reality. The agents who win are the ones who interpret the data, communicate it clearly, and use it to empower their clients. Facts do not have feelings, and this week, the facts are telling us we are moving into a colder market cycle. Inventory is rising, pendings are falling, and segmentation between new construction and resale is widening. For those who are prepared, this is not a warning—it is a roadmap.
