At the outset of the COVID-19 pandemic, the U.S. government acted swiftly to help American families stay in their homes—specifically through eviction moratoriums and mortgage forbearance programs.

The intent of these initiatives was to provide much-needed security during uncertain times, but of course, there were unintended consequences.

One unforeseen complication was the tightening of available housing in the market, which in turn catalyzed increased competition in the market—ultimately pushing prices sharply higher. As of late August 2021, it was estimated that the average home price in the U.S. increased in value by 24% since the start of the pandemic.

Rising housing prices are complicated because while current homeowners welcome that type of asset appreciation, such an environment can be detrimental to first-time homebuyers. But going forward, the housing market may be in for a slight shock, which could help rebalance the scales as it relates to that dynamic.

The potential for a paradigm shift in the U.S. housing market ties back to the eviction moratorium and loan forbearance programs—both of which effectively expired last month. At the height of the crisis, it’s estimated that up to 7.2 million families in the U.S. were enrolled in mortgage forbearance programs—programs that essentially allow homeowners to pause payments.

As of now, that number has dwindled down to 1.7 million mortgages in forbearance. However, it’s assumed that a high percentage of those homes still stuck in forbearance could ultimately come up for sale. That means a housing market previously starved for inventory could suddenly be injected with a hefty supply of fresh stock.

For context, consider that the U.S. currently has about 80 million homeowners and that the current supply of available houses is roughly 600,000. That means even if half the homes in forbearance at this time ultimately come up for sale, the available nationwide inventory could at least double.

Moreover, the expiration of the eviction moratorium for rental units will also undoubtedly increase the number of available units on the market—another factor that could weigh heavily on the overall housing market.

Last month, it was estimated that nearly 7.5 million renters in the U.S. were behind on their rent. And new figures reveal that landlords across the country are acting swiftly to initiate evictions in the wake of the moratorium’s expiration. Some estimates suggest that as many as 750,000 renters could be evicted before the end of 2021.

The situation is so dire, that in a recent nationwide survey of renters behind on rent, 43% of them indicated they were “somewhat likely” or “very likely” to be evicted within a couple months of the moratorium’s expiration.

Looking at a specific example, the state of Texas alone is said to have 486,000 individuals behind on rent, and of those, 330,000 indicated that they were at minimum “somewhat likely” to be evicted—based on data from a recent Census Bureau survey.

Of course, that doesn’t mean that all of those respondents will ultimately be evicted. Most states in the nation offer pandemic-related rental assistance programs, which should help reduce the number of renters that ultimately end up losing their homes.

However, not everyone will qualify for such assistance, and many renters aren’t even aware such programs exist. Additionally, the eviction process takes time, and many courts will be moving at a snail’s pace due to backlogs.

Looking at another example, in Fulton County, Georgia, it was reported that 500 new eviction cases were filed during the first week after the moratorium ended. With the Fulton County court processing an average of 35 cases per day, that means it could take weeks (or even months) for landlords in that region to secure the court order necessary to remove a tenant from his or her home.

Landlords can issue eviction notices, but that merely serves as official notification that the legal eviction process has begun. In most states, tenants can’t actually be evicted until a court rules on the matter. At that point, local law enforcement (i.e. the police) step in to ensure that tenants have complied with a court-ordered eviction.

Taking all of the above into account, it’s fairly certain that the pool of available housing units (homes and apartments) in the U.S. will inflate in the coming months. And as a result, it’s almost certain that the overall dynamic in the U.S. housing market will change. How it will change, and to what degree, are of course up for debate.

But even before the eviction moratorium ended, nationwide sales data was starting to indicate a softening in the U.S. housing market.

In June 2021, sales of new single-family homes fell to an annualized rate of 676,000, which was 6.6% below the number from May of 2021. The June 2021 number was also 19% lower than June of last year, when the number of new single-family homes sold was 839,000.

The big risk, of course, is that prices fall—and rapidly.

That’s what happened in 2008-2009, when many homeowners sank “underwater,” meaning the value of their mortgages was greater than the value of their homes. That situation—known as negative equity—occurs when the value of an asset is less than what’s owed on an associated loan.

Source: DQYDJ

It should be noted that few (if any) are predicting a 2008-2009 redo in the current U.S. housing market, but that scenario—even if remote—is something that investors and traders may want to keep in the back of their minds.

To track and trade the U.S. housing market, investors and traders can use single-stocks and ETFs from the sector, including: D.R. Horton (DHI), iShares U.S. Home Construction ETF (ITB), KB Homes (KBH), Invesco Dynamic Building & Construction ETF (PKB), PulteGroup (PHM), Realogy (RLGY), Redfin (RDFN), Re/Max (RMAX), Toll Brothers (TOL), SPDR S&P Homebuilders ETF (XHB) and Zillow (Z).

To learn more about trading sector-focused ETFs, readers may want to review a recent installment of Options Jive on the tastytrade financial network.

For updates on everything moving the markets, TASTYTRADE LIVE—weekdays from 7 a.m. to 4 p.m. CST—is also recommended.

Sage Anderson is a pseudonym. He’s an experienced trader of equity derivatives and has managed volatility-based portfolios as a former prop trading firm employee. He’s not an employee of Luckbox, tastytrade or any affiliated companies. Readers can direct questions about this blog or other trading-related subjects, to