Should you buy or rent? To answer that question, ask yourself where you will be in 28 months.
Zillow Chief Economist Stan Humphries says that home ownership is a good bet when "buying is more advantageous than renting." But renting can often be a better option.
Everyone understands if you're going to be in a house 20 years, you should buy a house. And if you're going to be in a house for six months, you should rent it.
Still, there is a caveat: "What they don't understand is when those two lines cross," calling that the "Breakeven Horizon." That is the gray area in which consumers should make the decision whether to rent or purchase.
With mortgage rates so low, "nationally you don't have to be in a house very long to make that decision," he says. Although the average "break-even" point across the country is just over two years, there's a big variation depending on where you live.
In some cities, the "break-even horizon" can be five to seven years. In others, however, that number can be less.
With home values constantly rising, "appreciation was so high people didn't even think buying versus renting, like they should have. Everyone thought the default decision was always buy the house."
That, however, turned out to be the wrong assumption. Shortly thereafter, the housing crisis sent the global economy into a tailspin, and sent foreclosure rates skyrocketing.
Historically, four to five years is the normal break-even number. If you will be in an area less than that, rent.
According to Freddie Mac, lenders are offering conventional 30-year mortgages at an average rate of 3.78 percent, down from 3.86 percent a week ago. But Humphries warns, once mortgage rates rise, the break-even horizon will rise, too.