Square footage has gotten awfully expensive
A new report from Realtor.com reveals a massive increase in price per square foot over the past five years.
Key points:
- Median home price gets more attention, but price per square foot is “a more solid measure” of a home’s value, according to a Realtor.com economist.
- New York City, Boston and Nashville had the steepest increases, with price per square foot up nearly 70% or more.
- But only looking at square footage metrics "can be really deceiving" — comps tell the real story, says bi-coastal agent Cara Ameer.
"Location, location, location" is how the saying goes, not "price per square foot, price per square foot, price per square foot."
But a new report from Realtor.com has pulled the unsung metric into the spotlight, showing how the typical price per square foot has increased by a stunning 52.7% from May 2019 to May 2024.
It almost makes the 37.5% increase in median home prices over that same time frame seem rational — if anything in the recent real estate market can be considered rational.
So why does the price per square foot matter?
Realtor.com senior economist Ralph McLaughlin says the change in price per square foot "is a more solid measure of how much more a home is worth over time than looking at changes in list price."
That's because the median list price doesn't necessarily provide the most accurate picture of what's going on in a market. "For instance, an increased share of smaller homes on the market could lower the median list price without affecting the overall value of homes," McLaughlin said.
Where prices have increased the most (and least)
The biggest jumps in price per square foot since 2019 have been in and around some of the nation's largest cities, with the New York City metropolitan area leading the way (up 84.7%), followed by the Boston metro (up 72.9%). Nashville comes in third, with a 68.6% increase.
Why? As with so many things, you can blame COVID and the "shift in working norms," said Hannah Jones, Realtor.com senior economic research analyst. Folks wanted room for a home office, but didn't want to move too far from major urban centers.
"As remote and hybrid work arrangements became more common, buyers flocked to areas that offered bang for their buck within a reasonable commute," Jones said.
Nashville, meanwhile, exemplified the willingness of some people to make bolder moves.
"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."
So which markets saw the smallest increases in price per square foot? A mixed bag of low- and high-priced markets: Detroit (23.2%) and Baltimore (24.8%), cities with below-median home prices; and San Jose, CA (26.3%), one of the country's most expensive metros.
An agent's perspective
"Price per square foot can be really deceiving," said Cara Ameer, a Coldwell Banker agent 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."
That's why Ameer focuses on comps. An assessment of comparable homes that have sold in the area looks at condition, lot size and other vital factors to provide a more accurate picture of what's really going on at any given location, location, location.