Economists like to say that buying a house is basically like becoming a landlord and then renting the home to yourself. This makes sense because landlords and tenants don’t always see eye-to-eye, but if you are your own landlord this problem goes away.

Consequently, in my mind,  the most important price in the housing market has always in my mind has always be then price-to-rent ratio. When I first started fretting about CDOs – and yes if you have forgotten it really was all about CDOs – was when the price-to-rent started to climb above 1.4.

My case at the time is that there was no way we could have faith that the models would hold in a world that no one had ever seen. The models only operate on data that they have, going to far out of sample, and you just don’t know what might happen.

Anyway, back to the question at hand – do we have too many homes. Hitherto my case has been based on units per person. We have been cranking out new homes at slower than average rates. It may look like we were building a lot of houses, but that was primarily offset by the fact that we weren’t building very many apartment buildings.

So in fact the number of housing units per person in the US is getting fairly tight. We can see something of that in the price-to-rent ratio.

The price-to-rent ratio is closing in on its long term average of 1-to-1.

However, it doesn’t look to me like there are any forces set to boost housing prices in the near term. Rates are only rising from what were record lows. Credit standards show no sign of loosening. Lots of folks have distressed credit and there are still likely a shadow inventory of used homes on the market.

On the other hand the fundamentals for rent look bright. Right now, rents are depressed primarily by a depressed economy and – in my opinion – a Fed that was slow in loosening monetary policy.

Both of those factors are set to change. Couple this with the shortage of units per person and we are looking ahead to a surge in rents. With that we will probably see a rapid increase in home building. Yet, I am betting that this time it is apartment homes that come roaring to the forefront. At the beginning this will likely contain a high fraction of build to rent, but unless rent prices can be held down we should expect a condo boom to run on its heels.

I am cuing Matt Yglesias to talk about how building restrictions over the next five to ten years are going to define cities for decades to come.

When the apartment boom comes – and the fundamentals suggest it is near at hand – will your locality be ready?