Is Average Price Per Square Foot A Useful Metric In Pricing A Home?


Is Average Price Per Square Foot A Useful Metric In Pricing A Home?
By Scott Rogers • October 5, 2020
Some folks might wonder whether analyzing a home's "price per square foot" is a good way to understand market value. Let's take a look by analyzing a data set of relatively similar homes. I'm going to constrain things pretty tightly to try to have homes that we might theorize would have a relatively similar price per square foot. Here's how I picked the data points... single family homes sold in the past year built between 2000 and 2010 on less than an acre with a garage in the Peak View or Cub Run elementary school district This resulted in (30) home sales in neighborhoods such as Barrington, Battlefield Estates, Crossroads Farm, Highland Park, Lakewood, etc. The average "price per square foot" of these homes was $136. But looking a bit more closely... (2) homes sold for less than $100/SF (10) homes sold for $100/SF - $120/SF (7) homes sold for $120/SF - $140/SF (5) homes sold for $140/SF - $160/SF (5) homes sold for $160/SF - $180/SF (1) home sold for more than $200/SF So, basically, the price per square foot of these relatively similar homes is ALL OVER THE PLACE! Let's take it a bit further to further illustrate this... Next, I took the square footage of each home and multiplied it by the $136/SF average to point to what we'll call a projected sales price for each home if it had sold at that average price per square foot. Then, I calculated the difference between the actual sales price and the projected sales price. If each of these property sellers had tried to sell their homes at that projected sales price based on the average of $136 / SF... (14) of them would have been leaving money on the table because the average price per square foot would have caused them to sell at a lower price than a buyer actually paid for their house. (16) of them would have likely never sold their house because the average price per square foot would have caused them to list their home at a higher price than a buyer ended up being willing to pay for their house. Oh, and the average difference between the actual sales price and this projected sales price? $84,619 So -- can the "average price per square foot" of similar homes be a helpful metric for predicting the sales price of another similar home? I'm going to go with "no" -- but I'm happy to be proven wrong. Email me with your thoughts, insights or questions at scott@hhtdy.com. Receive Updates by Email Recent Articles: There Are Plenty Of Types Of Houses That Exist That Just Are Not Available To Purchase Home Sales By Price Range In The City Of Harrisonburg Are You Compromising On Aspects Of Your Next Home That You Can Or Cannot Change Later? How Much Slower Are The Winter Months In Our Local Housing Market? Rockingham County and New Home Sales Drive Surge in Area Housing Market Find The Balance Between Optimistic And Realistic Home Pricing Room Size Is Difficult To Understand Solely From Real Estate Photos How Much Would You Value Not Having To Prepare Your Home For Showings? One Out Of Four Homes Is Taking Longer Than A Month To Sell Consider The Cost Of Your Planned Renovations When Planning Your Offer
Have any questions? Contact Scott Rogers at 540-578-0102 or scott@funkhousergroup.com
Based on information from the Harrisonburg-Rockingham Association of REALTORS® or its MLS, for the period Jan 1, 2000 through Nov 21, 2024 (unless otherwise noted).
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