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Elizabeth Weintraub

How to Use a Home's Price Per Square Foot

By July 9, 2008

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The home price per square foot averages in a neighborhood are sometimes used by home buyers to establish value.

Most buyers believe if the average per-square-foot price for a month is $300, then they can take a 1,000 square-foot-home and come up with a value of $300,000. But that's not how it works.

For one thing, if four homes sell in May and 25 homes sell in June, the June average price-per-square foot will be much more accurate than May's. The May numbers will be skewered because fewer homes were sold. On top of that, smaller homes command higher per-square-foot costs than larger homes.

Throw into the mix that buyers might not know the difference between median prices and average prices, and it's even more confusing. . . . read more about Home Price Per Square Foot.

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At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.

Comments

July 10, 2008 at 1:07 pm
(1) Carlo Fernandez says:

An amazing example that proper use of statistics should be used by potential buyers in assessing homes in the market.

Your observation that “smaller square-foot homes command higher per square-foot costs” leads to a suggestion of identifying price per-square-foot based on these categories: small homes (e.g. less than 5,000 sq feet, medium size homes (5,000 – 10,000 sq feet), and large homes (more than 10,000 sq feet).

In this way price per square footage might be closer to actual home values.

I’d have to agree that those figures are not determinate of any actual value and they only reflect trends.

July 10, 2008 at 11:47 pm
(2) homebuying says:

Smaller homes in my area are about 1,000 square feet; larger homes, 3,000. Just sayin’

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