Home shortages could develop as recovery unfolds...

Sooner or later, the economy will rebound, jobs will return and new households will form. When that time comes, however, there might not be enough housing to accommodate all the new family formations.

At a time when millions of foreclosures have flooded the market, and millions more are said to be in the pipeline, talk of a possible housing shortage may seem ludicrous. Nevertheless, as the recovery unfolds and vast numbers of echo boomers begin to enter and reenter the market, there may not be enough roofs to put over their heads.

Wherever the new households come from — adult children moving out for the first time or leaving the nest a second or third time after returning to Mom and Dad's to weather the economic storm, roommates uncoupling and going their separate ways or young couples starting families — most of them are typically renters.

The apartment sector could find itself stretched for other reasons, too. One is that many wannabe owners no longer could qualify for a mortgage. Maybe they've lost a job, perhaps their credit is dinged, or maybe they haven't been able to squirrel away enough cash for a down payment. Whatever the reason, they may be relegated to renter status for longer than normal.

Shortages could develop in the for-sale sector for multiple reasons, as well. For one thing, builders are having a hard time borrowing the money they need to buy land, develop lots and construct houses.

In larger markets where the big public builders tend to dominate, the lack of construction financing may not be as much of a problem. Public builders go directly to Wall Street for their funding, whereas small and mid-size local and regional builders most often go hat in hand to local banks.

But big or small, most builders aren't starting houses today until they either have nothing else to sell or buyers present themselves with an approved mortgage application.

Don't be fooled by statistics that show housing starts were up in April. The more important benchmark is permits.

A housing start is recorded when a builder sticks a shovel into the ground. Starts were strongly higher in April largely because builders began the push to move buyers who want to take advantage of the federal tax credits into their homes by the June 30 deadline.

Add to that the fact that the inventory of finished but unsold new houses is at the lowest level since 1971 and the shortage scenario takes on even greater credence.

Some inventory is necessary to take care of buyers who, for one reason or another, need to move in right away. Maybe they've just been transferred, or perhaps they're not terribly picky and want to get the buying ordeal out of the way.

It takes from one to five years to gain approval from local regulators to start a new community, depending on the jurisdiction, and five to six months on top of that to build a house. But given current market conditions, there still may be enough time for home builders to get ahead of the curve.