With Guyra expected to run out of water in August, the town will go onto level 3 water restrictions next week.
From Tuesday, locals will not be able to use hoses, sprinklers, or drip irrigation to water lawns, gardens, or hard surfaces, and must use buckets only to water vehicles.
Level 3 is triggered when Guyra Dam reaches 31 per cent; it was at 42 per cent this Tuesday.
Below average rainfall (22 per cent less for two years) and extremely dry catchments, Armidale Regional Council said, mean there is little prospect of respite in the short term.
Prolonged drought conditions have stretched the water supply, and there have been no flows from the catchment into Guyra Dam since February.
"We're on level 2 at the moment," mayor Simon Murray said, "and there's been no reduction in water consumption at all. At this consumption rate, Guyra will run out of water in mid- to late August, unless there's a significant inflow, or people change their water consumption habits."
Guyra residents consume 222 litres per capita per day - 30 per cent more than the NSW average (174 litres), and 15 per cent more than the national average (194 litres).
"Unfortunately, many people living in the Armidale region have a false sense of security about water storage in the area," a council spokesperson said.
"We have been extremely fortunate for many years, particularly in Armidale.
"Unlike many other regions in NSW, we have not seen water conservation embedded into people's daily habits, and promotion of water conservation has not been regular."
Residents can reduce their water consumption by taking shorter four-minute showers; installing rainwater tanks for non-potable water for toilets and washing; and checking for leaking taps and pipes.
Council will begin water patrols in Guyra from Tuesday. Under the Local Government Act, individuals can be charged $220 and corporations $2200 for breaching water restrictions.
Some people are already near breaking point, the Argus has heard. Many farmers have started selling their stock; nearly 3000 more sheep and lambs were sold at last week's stock than the previous ones, while one local said she had never seen so many cattle go through the yards.
"For some farmers," Cr Murray said, "it's becoming dire straits, as dams dry up. They're heading into winter, and there's no real pasture growth occurring."