Your Next Home – Is Price Per Square Foot the Best Indicator?
Your Next Home – Is Price Per Square Foot the Best Indicator?
Lebanon Democrat I January 25, 2020 Real Estate Review I Helene Singer Cash
Thinking of buying a new home this spring, then you have already had the conversation ‘how much home can we afford?’ No matter the size of the home you are interested in, the formula is still the same – Square Footage + Location = Affordability.
But what does affordability really mean? Honestly, it means different things to different buyers but generally it has to do with how much house your money can buy. Depending on the location, you may be able to obtain a bit more house for your investment dollar.
"Price per square foot is a good benchmark because it’s a way to compare homes in an apples to apples way," says Andrew Chen, personal finance expert and founder of HackYourWealth.com.
According to the latest estimates, Realtor.com, the median price for each square foot for a home in the United States is $123. But that can vary widely based on where you live and other factors. For instance, on the low end, you'll pay $24 a square foot in Detroit and on the expensive end, in San Francisco, $810.
"In general, price per square foot is higher in markets where there's high demand but land is scarce due to underlying geographic constraints," explains Robert Dietz, chief economist of the National Association of Home Builders. Examples of this would be Miami, NYC or San Francisco.
Other factors? "Prices are also higher in markets with steeper construction labor costs or more regulated markets where fees, zoning, and other rules make building difficult," Dietz continues.
Why is Cost Per Square Foot So Important?
When looking for your new home, the list price is quite possibly the most important figure you will look for. But that list price is generally calculated from the cost for each square foot. Understanding the average cost for each square foot for a home in that neighborhood (or the median cost for a square foot of home space, which is actually a better representative of the middle ground of the market than the average) will help understand the homes value.
Calculating the average price per square foot can be a bit deceiving. A 1000 square foot home may be listed for $100,000 or listed at $100 per square foot. Meanwhile the home down the block is 1500 square feet and listed at $142,500 or $95 per square foot. Traditionally, larger square foot homes have a bit lower price per square footage. This is why Average Price per Square Foot is most commonly used method.
Bottom Line – Average Price per Square Foot is just that, an average. Larger homes garner lower square foot prices and smaller homes garner larger square foot prices. This is an average to help both the buyer and seller understand the target range.
Cost Per Square Foot and How Does Middle TN Measure?
Cost per square foot can fluctuate from month to month and street to street. Knowing the target and understanding location, the cost per square foot will be only part of the equation when purchasing a home.
Middle TN Sales Average $ per Square Foot for December 2019 from Redfin.com
- Nashville
Average price per square foot: $190
How much home $305,000 can buy: 1605 square feet - Franklin
Average price per square foot: $202
How much home $305,000 can buy: 1732 square feet - Lebanon
Average price per square foot: $150
How much home $305,000 can buy: 2033 square feet - Mt Juliet
Average price per square foot: $156
How much home $305,000 can buy: 1955 square feet - Hendersonville
Average price per square foot: $149
How much home $305,000 can buy: 2047 square feet
HousingWire.com’s comparison of 10 cities in the U.S. and how much home you can get for your money:
- Boston
Median price per square foot: $1,160
How much home $305,000 can buy: 263 square feet - New York
Median price per square foot: $1,106
How much home $305,000 can buy: 276 square feet - San Francisco
Average price per square foot: $1,004
How much home $305,000 can buy: 304 square feet - Los Angeles
Average price per square foot: $646
How much home $305,000 can buy: 472 square feet - Washington, D.C.
Average price per square foot: $473
How much home $305,000 can buy: 740 square feet - Seattle
Average price per square foot: $454
How much home $305,000 can buy: 672 square feet - Miami
Average price per square foot: $313
How much home $305,000 can buy: 974 square feet - Dallas
Average price per square foot: $215
How much home $305,000 can buy: 1,419 square feet - Chicago
Average price per square foot: $193
How much home $305,000 can buy: 1,580 square feet - Detroit
Average price per square foot: $42
How much home $305,000 can buy: 7,262 square feet