Weighing in water (hydrostatic) is generally considered the best method. But, the real answer is that a single measurement, no matter how accurate, doesn't tell you much. What's really important is, are you gaining or losing fat? The best way to answer this question is to take a reading every few weeks and graph the results. The absolute accuracy of these readings isn't really important as long as you use consistent technique so that the error is about the same every time.
The two methods that work best for at-home measurements are skin-fold calipers and biceps IR units. Treat the numbers not as "body fat percentage" but as a "body fat index." If, after several readings, your body fat index is clearly trending up, you may want to reconsider your diet and exercise programs. It's like the gas gauge in your car - it doesn't tell you how many gallons you have, but it gives you a relative indication.
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