Price Per Square Foot: How And Why To Use It

andresr/GettyImages; Illustration by Bankrate

Price per square foot, a metric often used in helping to determine a home’s value, can be a useful comparison tool. It’s a tricky concept, though, because a home’s price per square foot multiplied by its square footage doesn’t necessarily add up to an accurate fair market value. For example, homes with unique features typically command a higher price per square foot, even if they’re on the smaller side. There are lots of other factors at play too — read on to learn more.

How to calculate price per square foot

Like calculating a home’s actual square footage, calculating price per square foot is relatively straightforward. All you need is the price and the total square footage, both of which can be easily found on a for-sale home’s listing. To determine a home’s price per square foot, simply divide the home’s list price by its total square footage. Here’s what the equation looks like:

So, for a $425,000 home of 2,000 square feet, the price per square foot would be $212.50. According to data from FRED, the Federal Reserve Bank of St. Louis, the median listing price per square foot of a home in the U.S. was $224 as of November 2024.

What determines the price per square foot of a house?

Every house is unique, and a number of factors can influence each one’s price per square foot. For instance, prime neighborhoods with desirable amenities, schools, and proximity to shopping, dining or a waterfront often command higher prices, says Realtor Cindy Raney, founder of Cindy Raney & Team with Coldwell Banker in Westport, Connecticut.

Property features such as high-end finishes, custom designs, advanced technology and sustainability features increase the price per square foot, she adds. “In luxury markets, exclusivity and prestige play a significant role — for example, a home with a custom kitchen, spa-like bathrooms or a wine cellar will likely have a higher value,” she says.

Larger lots or those with views or landscaped grounds contribute to a higher price per square foot, as does the condition and age of a property. Newer or recently renovated homes with modern features are likely to have higher prices per square foot than older homes with outdated systems.

Market conditions are another influencing factor when it comes to price per square foot. In a competitive market that’s characterized by limited inventory, this price tends to be higher. This is especially true in affluent areas where demand often outpaces supply, says Raney.

Average vs. median price per square foot

The average price per square foot for a home might be a different number than the same home’s median price per square foot. That’s because the numbers are calculated differently: The median figure is the price that’s in the middle of all home prices being compared. For instance, if you’re looking at 20 homes that recently sold, the median price would be that of sale number 9 or 10 in that list — half of the sample group sold for more than the median price, and half for less.

To calculate the average, however, you would add up the cumulative price per square foot of all 20 homes, and then divide that number by 20. Unlike a median, an average can be skewed by homes in the data set that have unusually low or high prices per square foot relative to comparables. For example, if one home in a neighborhood had ultra-luxurious interior finishes and therefore sold for considerably more than other neighborhood homes of the same size, that elevated price could have a dramatic effect on the overall average.

How to use price per square foot in your home search

When you’re looking to buy a house, price per square foot can be a helpful data point for understanding the home prices in a particular geographic region. “Homebuyers should analyze the price per square foot of their target areas to get a good idea of what a fair price is for a home in those areas,” says broker Robert Washington of Savvy Buyers Realty in St. Petersburg, Florida.

This information can also help prospective buyers gauge whether a specific home is priced reasonably compared to other homes in the same area or to other homes offering similar features, size, style and location. “If a home has a price per square foot that is way outside of what you’re seeing in recent sales comps, there is a good chance that the home may be overpriced,” says Washington.

When you’re ready to make an offer, the price per square foot can also inform your offer price. You’ll want to work closely with your real estate agent here — agents have deep expertise in their local markets and can help you choose the right price for a winning offer.

FAQs

• Is price per square foot accurate?
  

  The extent that price per square foot aligns with a home’s actual market value can vary depending on a lot of factors, including the home’s features, the location and comparable sales in the area. In general, a home’s price per square foot multiplied by the number of square feet can give you a ballpark price, but it will not be an exact one.

• What is the average price per square foot of a home in the U.S.?
  

  The national median listing price per square foot in November 2024 was $224, according to data from the Federal Reserve Bank of St. Louis.

• What is a good price per square foot?
  

  There is no universal “good” price per square foot, as prices vary significantly from market to market and can be impacted by features beyond the home’s actual square footage, like a pool or tennis court. In general, a good price per square foot is a figure that falls in line with the surrounding market’s recent sales comps, says Washington.

• What’s the average price per square foot in my neighborhood?
  

  To find your area’s average price per square foot, look online to find all of the listings from area homes sold in the last 90 days or so. Listing websites typically have a field that shows price per square foot. Add them all together, then divide by the number of homes, and that’s the average price per square foot in your area.