Erin Gobler4-minute read
UPDATED: August 15, 2023
When you’re shopping for homes, the price of each home is likely the first metric you look at to ensure you’re only considering those that fit within your budget. And while the list price is certainly important, it’s not the only price that matters.
It’s also important to consider the price per square foot of a home, which can help you estimate its value compared to other homes in the area. If you’re buying a home, price per square foot can help narrow down your search. And if you’re selling a home, local prices per square foot can help you price your home appropriately.
Keep reading to learn how to calculate the price per square foot, what the average price per square foot is, and how this metric can benefit both buyers and sellers.
Price per square foot is typically calculated by dividing the purchase or list price of a home by the overall total square footage of the home. For example, if a 1,000 square feet home is priced at $200,000, the price per square foot is $200.
Price per square foot is a metric frequently used in real estate. It can help buyers to compare the home values of different properties they’re considering, and sellers can use it when pricing their homes, using the average price per square foot in their area, and adjusting based on their home.
It’s worth noting that the price per square foot is often lower for larger homes, especially when compared to smaller homes with similar amenities. For example, a 2,000-square-foot home may have a price per square foot of $200, but that doesn’t mean a 2,500-square-foot home in the same neighborhood would also be priced at $200 per square foot. It may be closer to $175.
Additionally, price per square foot is most helpful when comparing homes that are of similar quality or have similar features. After all, the price per square foot on a newly renovated 1,500-square-foot home is likely to be quite different from the price per square foot on a home that hasn’t been updated since it was built in the 1970s.
The latest estimates show that the median price per square foot in the United States is $123. While the national average price per square foot may not be the same as the average in your area, it can still be a helpful starting point and a useful figure to have in the back of your head as you calculate the price per square foot of your home or one you’re considering buying.
One of the most important factors that affect home prices is the location and the local cost of living. As a result, the average price per square foot will be quite different in different parts of the country. Consider the notoriously high cost of living areas like New York City and San Francisco. In those metropolitan areas, you might expect the average price per square foot to be 5 – 10 times the national average for a home of 1,500 square feet.
On the other hand, some parts of the country will have an average price per square foot that’s far lower. For example, Detroit has an average home price of less than $65,000, meaning the average price per square foot is likely less than half the national average.
Calculating the price per square foot of a home can be helpful to both buyers and sellers. Below you can learn how this metric might benefit you based on which side of a home sale you’re on.
When you’re selling a home, it’s important to price it competitively to ensure it gets the attention it deserves. When working with your real estate agent to price your home, you’re likely to calculate the price per square foot of comparable sales in your area. Finding the local average can help you ensure you’re pricing your home appropriately.
And once you know the typical price per square foot near your home, you can adjust it for your home based on how the quality and features of your home compare. For example, if you’ve recently renovated your home, then nearby home prices and prices per square foot likely wouldn’t fit yours. As a result, you may choose to set your price higher.
The price per square foot of a home is also an important metric for a buyer to know. First, you can use the price per square foot as one metric when comparing local houses and home costs. If you find two comparable homes and one home has a lower price per square foot, that might help you make your decision.
Additionally, a price per square foot can be a negotiation tool. If you find a home you love that has a higher price per square foot than comparable sales in the area, you can use that to negotiate the price down.
Just remember, as we’ve mentioned before, that the price per square foot is only one important factor when you’re shopping for a home. And if the home in question is your dream home, it may be worth the higher price per square foot to ensure you don’t lose it to a buyer who is willing to offer more.
The price per square foot of a home is an important metric used for buyers and sellers. It can be found by dividing the purchase or list price of a home by its square footage. But the price per square foot of a home isn’t the only factor that matters, and the average price can vary widely by location.
If you’re just starting your home buying journey and aren’t sure what your budget should be, visit our Home Affordability Calculator. This information and the average price per square foot in your area can help you determine what size of home you can afford.
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