The Leading Indicators Are Doing Their Job

Seven out of ten weeks into 2026, the Austin market has outperformed the same week from 2025 on the new listing-to-pending ratio. That is not a streak built on optimism. It is built on data. January closed at a ratio of 0.75, beating 2025's 0.69. February closed at 0.79, beating January's 0.75. And March — with a month-to-date ratio already at 0.57 at the halfway point against last year's full-month 0.71 — is tracking toward a third consecutive month of outperformance. The new listing-to-pending ratio is exactly what it sounds like: for every new property entering the market, how many are going under contract? A ratio climbing toward 1.0 means demand is absorbing supply at an accelerating rate. That is what the first quarter of 2026 is confirming, week after week.

This week's live update showed 238 pending properties as of Monday morning, with active under contract at 479. The current ratio opens the week at 0.47 — low, as Monday updates always are — but the trajectory over the next two to three weeks as agents update prior-week statuses is expected to push it past last year's 0.73 for the same period. The recent move in mortgage rates from a low of 5.875% back up to 6.375% introduced a visible but modest pullback in near-term activity. The bond market offered some relief Monday morning, down 4.4 basis points, recovering a portion of Friday's losses.

Active Listings, Pending Volume, and the Activity Index

Active listings across the Austin market sit at 14,299, up 7% year over year. Pending listings have crossed 4,500, landing at 4,531 — a 7.3% year-over-year increase. When pending growth outpaces active listing growth, the activity index moves in one direction: up. The activity index measures the rate at which the market is absorbing available inventory — calculated by dividing pending and active-under-contract listings by total active plus pending. Across all categories, including resale and new construction, the combined activity index is 24.1%. On resale specifically, that number is 20.93%, clearing the 20% threshold that separates a sluggish market from one with real momentum. New construction is running at 31.47%. Of the 75 zip codes tracked, 24 are above 25% and roughly 19% are above 30%, with Round Rock posting the market's highest city-level activity index at 30.51%.

Months of inventory for the Austin area sits at 5.08, but that headline number is almost meaningless on its own. The range across the 75 tracked zip codes runs from 1.6 months in 78739 to 48 months in 78616 (Dale). The city of Austin proper is at 5.43 months — down 9.2% year over year, meaning conditions in the core city are actually tighter than this time last year. Quoting the metro average is the statistical equivalent of saying the average temperature in America is 65 degrees. Your job is to calculate the activity index and months of inventory for the specific product type and price point your client is buying or selling. That is the only number that matters.

The Headwinds Worth Acknowledging

The momentum picture is real — and so are the headwinds. Short sale listings in the Austin market have gone from 44 in March 2025 to 94 in March 2026 — a 113% increase. That number alone would be notable. What makes it worth a harder look is what is not showing up in the MLS. Tax records identify 254 pre-foreclosures, 1,497 properties at auction, and 726 bank-owned REO properties. The MLS, by comparison, shows 12 pre-foreclosures, 8 auction properties, and 90 REOs. The gap between what tax records document and what the MLS is marketing sits at 95.6%. That is not a data error. Banks learned from 2008 through 2010 that flooding the MLS with distressed inventory destroys comps for everyone. They are deliberately managing this off-market, and that is happening right now.

The recent legislative ban on institutional investors adds a new variable to this picture. Firms like BlackRock, Citadel, and Invitation Homes were historically significant buyers of distressed off-market inventory. Remove that buyer pool and servicers face pressure to route more properties through auction platforms and eventually the MLS. We are already seeing early signs of that pipeline beginning to open — properties with foreclosure history on Xome and Auction.com that did not sell through those channels are beginning to appear in the MLS. The rate at which distressed properties are entering tax records has increased from roughly 10 per week in Q4 2025 to 17.2 per week in Q1 2026. This is a trend to watch, not panic over. But it is not something to wave away.

Pricing, Percentile Dynamics, and City-by-City Performance

On pricing, March is historically one of the strongest months of the year — 21 of the past 25 Marches have been positive — and this year is tracking exactly that. The average closed price is up 7.6% month over month. The median closed price is sitting just under $450,000, which is essentially the same level as 36 months ago and just 1.3% above pre-pandemic pricing adjusted for inflation. A trend fair value model using Austin's historical compound appreciation rate of 4.8% places the entire market within 0.4% of where it should be. The overall Austin market is fairly valued right now. Of 30 cities analyzed, 17 remain historically overvalued, 13 are fairly valued, and Lockhart is the one city currently registering as undervalued.

A shift in the percentile demand data deserves attention. Historically, the top 25th percentile of the market outperformed the bottom 25th percentile in price appreciation — higher-priced properties were propping up the overall median. That dynamic has flipped. The top 25th percentile is now underperforming the bottom 25th percentile by 2.1%. Rate-sensitive buyers at lower price points are responding to improved affordability, and that is showing up in demand. The concern is the downstream math: if the top 25th percentile declines by more than 3.5 to 4%, the overall median moves down quickly — particularly when the bottom 25th percentile is not appreciating strongly enough to offset it. Demand is building, but pricing pressure remains.

Seven cities are up in value on the median sold price so far this year: Bastrop, Burnet (up 15%), Adele (up 12%), Lago Vista (up 5%), Liberty Hill (up 1.8%), Smithville, and Wimberley — which has now officially reached an all-time high median sold price of $600,000 and ranks second among the top 30 cities for performance. Dale is the top performer across the entire market. The city of Austin is down 5.1% on the median sold price year to date.

Economic Calendar and the Rate Outlook

The Federal Reserve meets this week and is expected to hold rates steady at 3.75%. The employment numbers have been soft but not at the level that would force a cut — weak, not Canada-weak. Canada lost over 80,000 jobs in their most recent employment report, and their central bank has far more runway to cut than ours does. The inflation picture is the other side of that equation, with core PPI data out Wednesday alongside the Fed's dot plot. The dot plot is the quarterly projection chart where each Fed member marks where they expect the federal funds rate to go over the next one, two, and three years. When those dots cluster lower, mortgage rates tend to follow. Wednesday also brings mortgage application data, making it the most consequential single day on the calendar this week.

The NAHB/Wells Fargo Housing Market Index, published this morning, showed the prospective buyer traffic component rising from 22 in February to 25 — a year-over-year gain of 4.2% in new home buyer walkthrough traffic. February's reading of 22 was the worst going back to 2012. The move to 25 is modest but directionally meaningful. Builders are also pulling back on new inventory releases in response to current demand, which is keeping new construction from becoming a supply problem.

The absorption rate is 17.49%, up from 14.8% at the start of the year. The market flow score — a 0-to-10 index of overall market health — is being watched closely for April. That is when the monthly ratio is expected to begin outperforming 2025, potentially marking the start of a confirmed four-month rebound cycle. The first quarter is closing strong. The headwinds are real. Both things are true at the same time.

The first quarter of 2026 is closing out ahead of 2025 on every leading metric that matters — and that story is being confirmed by data, not sentiment. The leading indicators are doing what leading indicators are supposed to do: pointing the direction before the lagging numbers catch up. Pending volume is up 7.3% year over year. Open house traffic is at levels not seen in years. The absorption rate is climbing. That is the foundation. The headwinds — a growing shadow inventory of distressed properties operating largely outside the MLS, a flipped percentile demand dynamic, and rate sensitivity that is clearly visible in this week's pending count — are real, are being tracked, and will affect some markets more than others. Your job this week is to know which market your client is actually in, because that answer is different in every zip code and at every price point.