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Is it cheaper to rent or buy?

A new report by online real estate resource Movoto.com claims that buying a home in New York is cheaper than renting -- assuming a home appreciation rate of 2 percent annually.

That seems like an awfully rosy assumption, and it’s one that few in the field share: In a third-quarter home prices survey by HomeGain, 70 percent of real estate agents and brokers in New York said they expect home prices to decline in the next six months, and the National Association of Realtors predicted at a conference last week that home values would stay flat through 2011. In a third-quarter statement released today, Zillow.com reported that chief economist Stan Humphries made the ominous prediction that the real estate downturn will eclipse that of the Great Depression. In Nassau, Zillow estimates that home values are down about 1 percent from a year ago and in Suffolk they’ve declined 4.4 percent.

Mark Brandemuehl, vice president of marketing for Movoto.com, said the study’s 2 percent appreciation rate was based on historical rates and projected inflation rates. But he agreed to run the numbers again, assuming zero percent appreciation – and in Nassau and Suffolk Counties, buyers still came out ahead of renters.

The study assumed buyers would pay a 20 percent down payment and stay in the house for at least 10 years. Month-to-month the payments might be higher, but the overall cost of buying was lower due to the tax benefits of owning a home, Brandemuehl says. For a three-bedroom home in Nassau, the monthly cost of buying was $602 lower than the cost of fair market rent as determined by federal Department of Housing and Urban Development calculations. In Suffolk, it was $954 lower.

While short-term market predictions are gloomy, the National Association of Realtors reports that 85 percent of recent homebuyers still see their home as a good investment and nearly half think that investment is better than stocks.

“Real estate is a better buy than gold because you can live in it, and it is going to appreciate,” Brandenmuehl says. “It may get a little worse, but we’ll see a return to a normal appreciation rates over 10 years.”

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