Shopping Around

It's almost impossible to open a newspaper or watch television without hearing about the "cooling" housing market in the United States. There are 4 million homes currently for sale, according to the National Association of Realtors. That's about 1 million more than a year ago. And those numbers don't include the expected new entries as rising interest rates force some of the homeowners with adjustable-rate mortgages to put their homes on the market. (About 25 percent of all mortgages have adjustable interest rates.)

All that extra inventory means that those lucky enough to be looking for a house are now entering a buyer's market. Across the country, builders and home owners are offering incentives like covering closing costs, adding extra goodies like upgraded appliances or even contributing to the initial down payment. But even buyers who get a great deal should be wary of unexpected costs. That extra-large house might not seem like such a deal if heating costs go up significantly. NEWSWEEK's Raina Kelley spoke to Katherine Salant, author of "The Brand-New House Book" (Three Rivers Press), about how to evaluate a home's resale value and make smart buys in a down market. Excerpts:

NEWSWEEK: Is it a good time to buy a house?

Salant's advice to postbubble homebuyers: 'Do your homework, now you have the time'

Katherine Salant: It's certainly becoming a buyer's market, which means that sellers are much more amenable to negotiations. Base price is not usually negotiable. But the options [on newly constructed homes], which usually have 50-100 percent markups, are very negotiable. You can say: "I want you to throw in the granite countertops or the marble tile in the bathroom.” But be conservative with your upgrades; don't pick everything. You want a house that nine out of 10 buyers will want five years from now. You need to know the conventions to look for in your market.

How do you figure out which upgrades have the most resale value in your market?