By Diana Olick, CNBC Real Estate Reporter NEW YORK ( CNBC) -- American homes have never been more affordable than they are today. Prices are down dramatically, mortgage rates are at record lows and desperate sellers are willing to make concessions. Still about one third of Americans choose to rent, despite the fact that 85% say owning makes more sense financially than renting over the long term, according to a new Fannie Mae study. Buying is cheaper than renting in most U.S. markets, according to another study from online real estate sale site Zillow. The upfront costs may be higher, but Zillow looked at what it calls the "breakeven horizon," which is when the cost of owning (including down payment, taxes, fees) meets the cost of renting. While markets will vary neighborhood to neighborhood, the breakeven point in many markets, like Minneapolis, Baltimore, Denver, St. Louis, Chicago and Charlotte, is under three years.
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"While we do agree that housing is bottoming, that doesn't mean we're coming back strongly," says Oliver Chang, former head of housing strategy at Morgan Stanley ( MS), who just launched Sylvan Road Capital, a new real estate fund which intends to invest $1 billion in the single family rental market over the next two years. "It is still incredibly difficult to get mortgage credit. The lending environment, whether government-backed or private, is still unclear." Despite the recession, the household formation rate has been growing steadily, which means more demand for shelter. Rentals will likely absorb much of that demand, unless and until lending ramps up. It will take several years for many Americans to not only rebuild their credit scores and rebuild their faith in home ownership. --Written by Diana Olick at CNBC