Downtown Austin Real Estate Report – 78701 Market Update

Downtown Austin’s condo market is flashing red: supply is overflowing while demand is barely moving the needle.

As of September 22, 2025, the 78701 zip code is sitting with 233 active listings against just 9 pending contracts. That imbalance drives the Activity Index down to 3.7%, one of the weakest in the metro area. To put it plainly, downtown sellers are facing long marketing times, multiple price drops, and a buyer pool with substantial negotiating power.

Inventory Pressure in 78701

With more than eleven months of inventory, downtown Austin is firmly in buyer’s market territory. Historically, Austin stabilizes closer to four to five months of inventory. The current oversupply is being fueled by a mix of high-rise condos, investor-owned resales, and a steady flow of new product hitting the market.

Days on market tell the same story. Properties are averaging 111 days before going under contract, nearly four months. This extended window highlights the patience buyers have today and the urgency sellers need to price realistically from the start.

Pricing Dynamics

Median pricing in 78701 year-to-date is $675,000, down 7% from 2024. The average sold price still hovers just above $1 million, but averages are skewed by luxury transactions. More than half of the active listings have already recorded at least one price drop, with average reductions in the $75,000 range.

The affordability ladder is steep. To buy at the 50th percentile list price of $740,000, a household would need roughly $225,000 in annual income under the 28% rule. At the 90th percentile, list prices push above $2.5 million, requiring nearly $800,000 per year to comfortably qualify. This underscores why demand has slowed—high borrowing costs combined with luxury-level price points have narrowed the buyer pool.

Seller vs. Buyer Positioning

For sellers, the message is clear: pricing aggressively at the outset is critical. Chasing the market with incremental cuts is prolonging time on market and eroding negotiating power. Downtown’s heavy concentration of investor-owned units and vacant properties (over 54% of current listings are vacant) means buyers can afford to wait for deals.

For buyers, opportunity is abundant. With supply levels nearly triple that of a balanced market, negotiating room is substantial. Buyers are not only negotiating on price but also on concessions, closing costs, and even furnishings in some cases.

Long-Term Context

Over the past two decades, 78701 has posted a strong compound annual growth rate of 6.28%, outperforming the Austin metro overall. Even with today’s correction, long-term investors should note that downtown remains a core submarket with resilient fundamentals once affordability stabilizes and demand returns.

That said, the road to recovery will not be quick. Unless job growth and in-migration accelerate, it will take multiple years for downtown inventory to rebalance. Agents working in this submarket should position downtown opportunities as long-term plays—great for buyers who want leverage today, but requiring patience for sellers hoping to regain peak pricing.

FAQ

1. Why is downtown Austin struggling with so much inventory?

Downtown has a concentration of condos and luxury high-rises, many owned by investors. With high interest rates and affordability constraints, demand has slowed while new product continues to come online. This imbalance has pushed active listings to 233 while only 9 are pending, creating over 11 months of inventory.

2. What does an Activity Index of 3.7% mean?

The Activity Index measures the share of active listings going under contract. A healthy market typically runs above 20%. Downtown’s 3.7% shows extremely low turnover, meaning homes are sitting and buyers have little urgency to act.

3. How much have downtown Austin home prices dropped?

Year-to-date, the median sold price is $675,000, down 7% from 2024. Average sold prices remain around $1 million, but that’s heavily influenced by luxury sales. The more telling figure is that over half of active listings have taken price drops averaging $75,000.

4. What income is needed to buy in 78701?

At the 50th percentile, with a list price of $740,000, buyers would need about $225,000 in annual income under standard affordability rules. At higher tiers, affordability stretches dramatically: the 90th percentile requires nearly $800,000 in annual income to qualify.

5. Is downtown Austin still a good investment?

For long-term investors, yes. The 78701 zip code has posted 6.28% annual appreciation over the past two decades. Today’s conditions create a strong buyer’s market, with significant leverage and lower entry points. However, sellers must expect longer marketing times and lower offers until inventory normalizes.​