Austin Housing Market Update: Price Declines, Negative Equity, and the Growing Risk for Recent Buyers
The Austin housing market continues to feel the aftershocks of its rapid pandemic-era price surge. Recent data from the July 2025 ICE Mortgage Monitor reveals that home prices in Austin have declined nearly 20% from their 2022 peak, the sharpest drop among major U.S. markets. As prices fall, negative equity is becoming a growing concern, particularly for homeowners who purchased at the height of the market.
According to the ICE Home Price Index, Austin home prices are down 19.7% from their peak in May 2022, representing an average dollar loss of $117,717 in home value. This decline exceeds price corrections in other hard-hit markets like Cape Coral, Florida (-13.3%) and San Francisco (-8.9%). The drop is driven by a sharp increase in available inventory, which is now 69% higher than pre-pandemic levels, based on data from ICE and Realtor.com. With more homes on the market and demand cooling, prices have been under sustained downward pressure for over two years.
This price correction is not impacting all homeowners equally. ICE’s latest report shows that negative equity rates in Austin are disproportionately affecting those who purchased homes recently, especially in 2022. Among all outstanding mortgages in Austin, 4.2% are currently underwater, meaning the homeowner owes more than the property is worth. However, for loans originated in 2022, the negative equity rate jumps to 18.2%. The risk is even more severe for FHA borrowers from that year, with 65% of those loans now underwater.
These figures translate to significant numbers when viewed through the lens of local sales activity. In 2022, a total of 34,319 residential properties were sold in the Austin area, including 1,694 financed through FHA loans. Applying ICE’s data, roughly 6,243 of those 2022 homebuyers are now underwater, with approximately 1,101 of those being FHA-financed purchases experiencing negative equity. For these homeowners, declining property values could limit options for refinancing, selling, or tapping into home equity.
Wider market conditions also reveal a growing inventory surplus across Texas. Austin is not alone, with San Antonio experiencing a 4.3% negative equity rate and Texas as a whole contributing to the South's concentration of markets with heightened risk. Cape Coral, Florida, remains the nation’s most exposed market, with a 7.8% overall negative equity rate and nearly 70% of recent FHA loans underwater.
While negative equity remains low among homeowners who purchased in 2020 or earlier, the rapid price growth during the pandemic left those who bought at the peak particularly vulnerable. ICE’s research shows that 92% of all underwater mortgages nationally were originated in 2021 or later.
The broader housing landscape in Austin reflects this transition. Inventory levels have soared, price growth has reversed, and affordability remains a challenge. In early June, home prices across Austin rose by just 0.02% on a seasonally adjusted basis, an annualized rate of 0.3%, signaling further stagnation ahead. Single-family prices are still up 1.6% year-over-year, but condo prices have declined by 1.3%, reflecting softening demand in that segment.
These conditions have also affected market activity. Year-to-date through July 2025, a total of 17,394 residential properties have sold in the Austin area. This represents a 7.4% decline from the same period last year, though still 4.8% above the long-term average, according to Team Price Real Estate. Meanwhile, monthly sales for July 2025 totaled 2,380 properties, down 15.2% year-over-year and 14.2% below the historical average for the month.
For homeowners who purchased in recent years, particularly in 2022, the combination of falling prices, elevated mortgage rates, and rising negative equity underscores the importance of understanding market conditions. While negative equity does not automatically lead to foreclosure, it can limit mobility and financial flexibility. Borrowers with minimal equity are often the first to face hardship when home prices soften, a trend that ICE warns could intensify if market conditions deteriorate further.
As the Austin market continues to correct, prospective buyers, sellers, and existing homeowners alike should remain focused on local data and long-term trends. Price cycles, equity positions, and inventory levels will play a critical role in shaping opportunities and risks over the coming months.
Source: ICE Mortgage Monitor, July 2025, https://mortgagetech.ice.com/resources/data-reports/july-2025-mortgage-monitor
FAQ: Austin Housing Market, Negative Equity, and Price Declines
Is the Austin housing market still declining in 2025?
Yes, according to the ICE Home Price Index, home prices in Austin have declined 19.7% from their May 2022 peak. This is the sharpest price drop among major U.S. housing markets, driven by a significant increase in inventory and a slowdown in demand.
How many Austin homeowners are underwater on their mortgages?
The latest ICE Mortgage Monitor reports that 4.2% of all outstanding mortgages in Austin are underwater. Among homeowners who purchased in 2022, 18.2% are in a negative equity position. For FHA borrowers from that year, the situation is more severe, with 65% of loans underwater.
What is causing the rise in negative equity in Austin?
Negative equity is largely concentrated among homeowners who bought at the peak of the market in 2022 when home prices were significantly higher. Since then, prices have declined nearly 20%, reducing home values and pushing some borrowers into negative equity, especially those with low down payment loans like FHA.
How many homes were sold in Austin during the peak year of 2022?
In 2022, a total of 34,319 residential properties were sold in the Austin area, including 1,694 FHA-financed purchases. These transactions account for the majority of the homeowners now at risk of negative equity, based on ICE’s data.
Is now a good time to buy or sell a home in Austin?
The market is highly localized and depends on individual circumstances. While prices have declined, elevated inventory levels have created more options for buyers. Sellers, especially those who purchased recently, may face challenges due to falling prices. Market participants should closely monitor trends in prices, inventory, and equity positions before making decisions.
