Price Per Square Foot: What’s The Average And How Do I Calculate It?
What’s The Average Price Per Square Foot? The average price per square foot of a home is the cost or current market value of a home divided by the square footage of the home. According to recent data, the average price per square foot in the U.S. is $123, but this number varies widely.
In the real estate industry, a common way to measure a property’s value for money is the price per square foot of livable floor space (we generally don’t include lofts, cupboards, etc.). The equation to calculate this metric is: price per square foot = price/floor space (ft²).
According to the latest estimates, 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. On the expensive end, in San Francisco, $810.
When there are extremes in pricing, the median price per square foot is far more valuable as an indicator of value. It’s simply the middle point between the higher half of the data from the lower half.
- Northeast region: Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont, New Jersey, New York, Pennsylvania
- Midwest Region: Illinois, Indiana, Michigan, Ohio, Wisconsin, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota
- South region: Delaware, D.C., Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, West Virginia, Alabama, Kentucky, Mississippi, Tennessee, Arkansas, Louisiana, Oklahoma, Texas
- West Region: Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, Wyoming, Alaska, California, Hawaii, Oregon, Washington
Price Per Square Foot: What’s The Average And How Do I Calculate It?
When it comes to calculating the average price per square foot of a home, there are many factors you should be aware of. Even though this concept seems like it should be a straightforward mathematical computation, it’s actually more complex than that.
In fact, there’s a lot of nuance in evaluating the importance of square-foot pricing. Nonetheless, square-foot pricing is another effective tool prospective homebuyers can use to assess a home’s value.
If you’re hoping to buy a house, the very first dollar figure you’ll want to know is the home’s price, of course. But a close second is its cost for each square foot—and 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).
Here’s what you should know about these numbers, and how to use them to your advantage as you shop for a home.
What’s The Average Price Per Square Foot?
The average price per square foot of a home is the cost or current market value divided by the home’s square footage. According to recent data, the average price per square foot in the U.S. is $123, but this number varies widely.
It’s important to know the difference between the median price and the average or mean price. The average price is simply the arithmetic mean, calculated as the total of all home sales, divided by the number of sales. An average sales price can be skewed by a few higher or lower home values.
The median, however, is the value separating the higher half of a data sample from the lower half. If all of the real estate property prices were lined up by value, the home sale in the middle would represent the median home value.
According to the latest estimates, 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. On the expensive end, in San Francisco, $810. So why such a wide range?
Well, it’s no secret that certain neighborhoods are considered more desirable than others, and fetch a better price as a result.
Why Is There So Much Variation?
There are many reasons why a home’s average price per square foot can vary, but one of the biggest factors affecting price per square foot averages is location. The impact of location can cause a home’s average price per square foot to vary significantly.
In fact, a nationwide average price per square foot is meaningless because it’s impossible to compare home prices in locations like San Francisco or New York City to other prices nationwide.
Other variables that impact a home’s average price per square foot are the school district in which a home is located, its proximity to business districts or parks, and intangibles like views and scenery.
These factors all affect a home’s market value, which therefore impacts the home’s square foot calculation.
How Do I Calculate My Home’s Price Per Square Foot?
As a homeowner, you can calculate your home’s price per square foot by taking the purchase price of the home and dividing it by the square footage of the home.
You could also perform the same calculation on other homes that have recently sold in the neighborhood, which could then be averaged to find the average price per square foot for the block or a specific area.
Typically, a home’s cost for a square foot is prominently featured on the listing—both online as well as in those property information sheets you get at an open house. But a home’s price by the square foot doesn’t tell you much on its own. This number is best understood in comparison with similar homes in the surrounding market.
So your next step should be to type in the city, neighborhood, or ZIP code of interest into a site like realtor.com/local. This will give you the median cost of a square foot for homes in that area of your city (as well as the median asking price, closing price, and the number of homes for sale in the local market—all useful info during a house hunt).
When Is Calculating Price Per Square Foot Useful?
While square-foot pricing is an effective tool for determining how much your house is worth, using it as an apples-to-apples comparison can sometimes cause limitations.
The average price per square foot calculation is useful mainly to spot wildly overpriced or underpriced homes. Though this can be beneficial, it’s not always the best method for assessing a home’s value.
For example, this calculation doesn’t consider the condition of the home or the amenities it provides. In addition, it only considers the house and not the property on which the home is located.
Square footage isn’t always created equally, as smaller homes generally have a higher price per square foot, and some livable areas of the home, like finished basements, aren’t included in the house’s overall square footage.
In this case, a more meaningful rough calculation would be between the average price per square foot and the median price per square foot.
How cost per square foot can help you negotiate
When you run your comparison of a home’s cost per square foot with the neighborhood median, you can use that information to help you determine whether a place is a bargain or overpriced.
Let’s say you see a home you love priced at $150 per square foot, but then you find that the median price for a square foot for the neighborhood is $135.
This suggests the cost of the home you’re looking at could be too expensive—which spells an opportunity for you to negotiate for a lower purchase price.
Just point out to the sellers that homes of similar size in the area cost far less. Or, conversely, if the median price of a square foot is $135 but this home is only $120, you may have a bargain in your crosshairs that you should snap right up!
Of course, as a buyer you know there’s more to consider than the cost for each square foot of housing. A single-family home on 5 acres of real estate will generally be worth more than one with the same square footage but on a small-size lot.
A new home generally costs more. And a large house may cost more overall because of higher labor costs and total construction costs, but the market will only pay so much. A house may actually sell for less than you might expect, based on its size, if it is overbuilt for the area.
What About Price Per Square Foot In New-Home Construction?
New home construction costs $100 to $155 per square foot on average with most homeowners paying $155,000 to $416,250, in addition to the cost of your land. Costs vary considerably based on location and all your choices in design and interior and exterior finishes.
Now let’s talk about how contractors calculate the price per square foot when it comes to the costs of new-home construction. The two main factors contractors look at when calculating square foot pricing are materials and labor, so their use of the term is a little different.
For example, unlike newer homes, older homes tend to have lower prices per square foot because older materials tend to generally be considered less valuable.
Despite this, neighborhood desirability can dramatically affect the market value of older homes, and the average price per square foot reflects that.
Homebuilding costs $100 to $200 per square foot with the average landing right around $150 per square foot. The price you will ultimately pay is based on the location of the property, the size and footprint of the house, and the quality of the finishes and products you select.
Production Home vs. Custom Home?
While the above is an average of all homes built within a given region, new homeowners considering custom homes should be ready to pay a bit more in additional costs that are specific to the custom home building process.
- Architects: According to HomeAdvisor, architects can cost anywhere from $60 to $125 an hour. For a 2,500 square foot house, and hiring an architect at $60 an hour, the design fees can run at about $4,000.
- Engineers: Expect to pay around $100 to $150 for their expertise.
- Land Surveyor: Fees can range anywhere from $200 to $800 depending on your lot size, location, and age of the lot
Again, these price points are added to the overall costs of buying your own lot, building materials, other labor costs, and machine and equipment costs.
The 2019 Construction Cost survey by the National Association of Home Builders (NAHB) found that the average cost per square foot to build a single-family home came out to around $114. In this survey, construction cost totaled $296,652 for an average 2,594 sq. ft. home.
Of course, the design of a home will influence construction costs. However, construction and material quality, as well as interior finishes, tend to have a significantly higher impact. What does this mean exactly?
Outfitting even the smallest of homes with the latest and greatest finishes the highest quality construction materials will still cost a pretty penny. So what can you expect to pay? Well, that largely depends on where you’re building.
The cost of land, labor, and materials varies widely across the country, depending on a region’s climate or the natural disasters to which it is prone. And don’t forget that high demand increases price: If you’re building in a highly desirable area, expect land to be even pricier.
The average price per square foot is a useful tool that can help you assess the value of your home. You can calculate this value by taking the purchase price of the home and dividing it by the square footage of the home. But remember to be aware of the limitations that come with this comparison, and make sure to use other supplementary tools when assessing your home’s value. Learn more about your home’s value and explore other home buying topics in the Learning Center.
A Step-by-Step Guide to the Home Building Process
- Prepare Construction Site and Pour Foundation.
- Complete Rough Framing.
- Complete Rough Plumbing, Electrical HVAC.
- Install Insulation.
- Complete Drywall and Interior Fixtures, Start Exterior Finishes.
- Finish Interior Trim, Install Exterior Walkways and Driveway.
Whether you’re going with a production home or a custom home, make sure to establish a realistic budget with your builder and stick to it. Don’t be enticed by nicer-looking designs to add to your home if it puts you way out of your budget.
Most homebuyers know that additional customizations will increase the cost of your custom home, but unexpected costs can take you by surprise, so make sure to do your homework.
If you’re focused solely on initial cost, building a house can be a bit cheaper — around $7,000 less — than buying one, especially if you take some steps to lower the construction costs and don’t include any custom finishes.
Price Per Square Foot What’s The Average How Do I Calculate It