Get Ready: The Price Per Square Foot of an Average U.S. Home Has Soared Over 50% Since 2019
The price per square foot of a home is often an overlooked metric in real estate. When shopping for a house, buyers usually focus on the total size, list price, and location. However, the price per square foot is a crucial metric that’s now gaining significant attention. According to the latest monthly housing report from www.reallhub.com, the typical listed price per square foot grew by a staggering 52.7% from May 2019 to May 2024.
In contrast, the typical listed home price increased by 37.5% over the same period, reaching the current nationwide median of $442,500.
“The price-per-square-foot metric is an important one to pay attention to,” says www.reallhub.com senior economist Ralph McLaughlin. “The change in that metric is a more solid measure of how much more a home is worth over time than looking at changes in median list price.”
In essence, a home’s median list price can rise or fall without accurately reflecting the true state of the market.
“The median list price can fluctuate even if the market is stable,” McLaughlin explains. “For instance, an increased share of smaller homes on the market could lower the median list price without affecting the overall value of homes.”
Where the Price Per Square Foot Has Risen the Most
Examining the markets with the steepest increases in price per square foot reveals substantial growth in popular metropolitan areas.
Based on listing price, properties in the New York City metro area (+84.7%), Boston (+72.9%), and Nashville, TN (+68.6%) have seen the greatest increases in price per square foot since May 2019.
The soaring price per square foot in New York City and Boston can largely be attributed to the COVID-19 pandemic-era “shift in working norms,” says www.reallhub.com senior economic research analyst Hannah Jones.
“As remote and hybrid work arrangements became more common, buyers flocked to areas that offered bang for their buck within a reasonable commute,” she says.
This increased demand farther from urban downtowns led to scarce inventory and rapid price growth around New York City and Boston, particularly for homes that offered additional space to set up a home office.
Similarly, Nashville is yet another pandemic “boomtown” that homebuyers flocked to in search of more space at relatively more affordable prices.
“Buyers from high-priced areas flocked to affordable Sun Belt metros,” explains Jones. “Incoming demand led to low inventory and climbing prices. Though inventory levels have recovered significantly in the area, home prices have not softened.”
The markets that saw the lowest return on price per square foot included Detroit (+23.2%), Baltimore (+24.8%), and San Jose, CA (+26.3%).
Why Price Per Square Foot Matters
The price per square foot is a crucial metric in real estate because it allows for easy comparison between different properties, regardless of their size. This helps buyers and sellers determine whether a property is priced appropriately for its location and condition. Additionally, price per square foot helps in assessing market trends, indicating whether prices in a particular area are rising or falling.
Yet while price per square foot is valuable information, it’s only one data point of many that buyers and sellers should consider.
“Price per square foot can really be deceiving,” explains Cara Ameer, a bicoastal agent with Coldwell Banker licensed in California and Florida. “A smaller home can have a higher price per square foot versus a larger one, and that can skew the numbers.”
So rather than focus only on price or price per square foot, Ameer recommends using comparables, or “comps,” to provide a more complete idea of a home’s value. This takes into account the home’s condition, upgrades, location, lot size, and other features to make a more informed decision.
For more insights and detailed reports, visit www.reallhub.com.
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