(Nation's Building News) Even as foreclosures continue to flood some of the worst-hit housing markets in the country, economists are beginning to sound the warning that today's extremely low levels of new residential production could lead to significant housing shortages, especially among market-rate rental apartments, as household formation rates return to normal.

The housing downturn and economic recession have kept household formation rates at below-normal levels for roughly three years, said NAHB Chief Economist David Crowe. As the economy moves to higher ground, the housing market will begin to feel the pressure from new households, he said, and there will be a surge of demand from echo boomers, who comprise an even larger group than their baby-boomer parents.

NAHB economists project that the industry will need to deliver 16 million homes over the next 10 years to keep pace with demand. As the excess inventory is worked off, which is likely by the end of 2012, the long-run demand for new housing -based on population growth, immigration and the replacement of losses from the housing stock - will average approximately 1.5 million single-family and 300,000 multifamily units annually, or about 1.8 to 1.9 million total starts.