WHY USE THE AVERAGE PRICE PER SQUARE FOOT
The average price per square foot calculation is used because it allows us to make comparisons between different types and sizes of homes. The price per square foot is calculated by dividing the square footage of a home, by the home’s sales price. For example, if a home has 2,000 square feet and sold for $300,000, the average price per square foot is $150 ($300,000 / 2000 = $150). In other words, each square foot of the home cost $150. If we expand this approach to all the homes that sold in a particular neighborhood within a specific period of time, we can then compute an average price per square foot for that neighborhood. For example, if 3 homes sold for $300,000 each in a neighborhood in January 2009, and home 1 had 2,000 sq ft., home 2 had 2,200 square ft., and home 3 had 2,400 square ft., we then get an average price per square foot of $136.36 ($900,000 / 6,600 sq ft = $136.36).
The average price per square foot allows us to evaluate the price of any home. For example, if a home comes on the market in the same neighborhood as the homes above, with a $200 per square foot asking price, this home is substantially higher than other homes that sold in the example above. There may be good reasons for why this home is more expensive, such as it may have more upgrades, a large lot, a pool, etc. However, if the home is similar in size and quality to other homes in the community, then a $200 per square foot asking price would not be justified.
TOTAL PROPERTIES SOLD
For all residential properties sold from January through December 2009, the average price per square foot (APPSFT) metric is down from 2008. For example, the APPSFT for residential properties that sold from January to December 2009 was $465.50. The APPSFT for the same period in 2008 was $532.45. This represents a 14.3% decline. The graph below provides a month-by-month analysis. The solid red line shows the APPSFT month-by-month for 2008, while the dashed red trend line shows that the APPSFT decreased slightly from early 2008 to late 2008. The solid blue line shows the APPSFT month-by-month for 2009, while the dashed blue trend line shows that the APPSFT remained consistent for most of 2009, but had an uptick in the last month of the year.
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DETACHED SINGLE-FAMILY HOMES
Looking only at detached single-family homes sold from January through December 2009, the average price per square foot (APPSFT) metric is down from 2008. For example, the APPSFT for detached single-family homes sold from January to December 2009 was $527.81. The APPSFT for the same period in 2008 was $620.63. This represents a 14.9% decline. The graph below provides a month-by-month analysis. The solid red line shows the APPSFT month-by-month for 2008, while the dashed red trend line shows that the APPSFT stayed consistent throughout 2008. The solid blue line shows the APPSFT month-by-month for 2009, while the dashed blue trend line shows that the APPSFT decreased from early 2009 to late 2009.
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CONDOMINIUMS AND TOWNHOMES
Looking only at condominiums and townhomes sold from January through November 2009, the average price per square foot (APPSFT) metric is down from 2008. For example, the APPSFT for condominiums and townhomes sold from January to December 2009 was $432.93. The APPSFT for the same period in 2008 was $486.19. This represents a 10.9% decline. The graph below provides a month-by-month analysis. The solid red line shows the APPSFT month-by-month for 2008, while the dashed red trend line shows that the APPSFT increased slightly from early 2008 to late 2008. The solid blue line shows the APPSFT month-by-month for 2009, while the dashed blue trend line shows that prices stayed consistent during 2009, but then had an uptick in the last 2 months of 2009.
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Source: Source data obtained from Sandicor, Inc.
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