• The housing market appears to be entering a recovery period, Charles Schwab said in a recent note.
  • They say supply, price growth, and home sales all look to be improving from past conditions.
  • “That comes with an important distinction, though: A recovery is not synonymous with a booming expansion.”

The housing market is on a slow climb out of its affordability crisis, though time is still needed to properly relieve consumer pain, Charles Schwab said in a note on Wednesday. 

“As housing was the first sector to kick off the rolling recessions we’ve pointed out for more than two years, it now looks like it’s participating in the start of rolling recoveries,” the bank said. “That comes with an important distinction, though: A recovery is not synonymous with a booming expansion.”

Instead, it’s more that runaway price and sale trends are easing from extremes, while supply-side conditions are showing signs of meaningful improvement. 

First, the steep acceleration in home-price growth looks to be over, Schwab said. That’s in reference to the marked increases seen between 2022 and 2023, as pandemic buying fever turbocharged pricing. Just four years into this decade, prices have rocketed 47% higher.


While growth has normalized, prices still remain elevated, with median prices of existing and new homes both near all-time highs. Prices for the two property types average $412,000 and $433,000, respectively.

But according to a new report from Redfin, sale-price growth could keep softening in the coming months. That’s amid a rebound of sellers that are slashing their asking prices.

Second, sales are steadily picking up, though meaningful bounce-back hasn’t happened yet, Schwab said. 

In the past few years, home sales plummeted, falling by a maximum drop of 41%. That’s been outdone by new home sales, which fell almost 50%. 


Though still below their cycle peaks, both are up 9% and 22% from their recent troughs.

Third, new inventory supply has soared, as homebuilders hurried to respond to unmet demand. Even before the pandemic, a shortage of housing has been a point of pressure for consumers, only made worse by homeowners that have been kept from moving due to today’s high mortgage rates.

“For any recent or aspiring homeowner, it’s no surprise that affordability is significantly constrained in this cycle. This has prevented individuals and families from purchasing a home, forced them into intense bidding wars, or caused them to make more painful financial tradeoffs in order to purchase a home,” Schwab said.

In fact, the Housing Affordability Index fell to its all-time low last year, but Schwab noted that it seems to be pushing back up from the bottom. However, investors should expect this recovery to be sluggish.


The bank added that mortgage rates are likely to keep drifting higher, as federal interest rates normalize at around current levels. Though mortgage highs have been a headwind for consumers, buyers are likely to adjust to this over time.

“That doesn’t mean housing can only fully recover if prices and rates come down dramatically, given there are other (perhaps stronger) factors at play, such as supply,” Schwab said. “Yet, a stabilization in activity, price growth, and interest rate volatility will likely provide a more stable foundation for the sector.”