Price per square foot is a handy tool when trying to calculate value for a house. It is commonly used by Realtors, home buyers and sellers, and Appraisers. It can also be a bit misleading. So I thought it was time to take a good hard look at it.
Two weeks ago I got an e-mail from a reader wanting to know if Lake Oswego had an average price per square foot that houses were selling for. Trying to be helpful, I went back into the previous week’s sold properties (3/7-3/13) and found that they had sold for an average of $133 per square foot. However, this lumped all of the solds together (condos and detached houses), and was only a 1 week snap shot. Wanting to delve deeper, I re-did this exercise and broke it up into condos, detached houses, and waterfront. Again, these are averages.
This snap shot reflects sales in the last 30 days:
18 condos have sold in the last 30 days. The least expensive per square foot was $68. The most expensive was $389. The average sold price per square foot was $158.
Single Family Homes
33 single family homes have sold in the last 30 days. The least expensive per square foot was $92. The most expensive was $279. The average was $174 per square foot.
The average/average (in other words both condos and detached houses) was $167 per square foot.
Now, some clarification. These are some widely swinging values. What separates the low values from the high values are variables such as age, condition, and location. A house that is brand new is generally worth more than a house that is 50 years old. A house in a high-demand location like First Addition is going to be worth more than a house on a busy street in Lake Grove. These averages do not take into consideration these variables.
When you value a house using price per square foot, you really need to be comparing that property to others that are as similar to it as possible. But averages are interesting. It kind of creates a lens through which to look. If the average for houses in LO is $174 per square foot, and you are looking at a house that is priced either greater or less, why is there the difference? Is it worth more because it’s a fantastic house? Are you getting a chance to get a screaming great deal?
I purposely left out waterfront properties from these averages because I think that they have their own unique valuation. We happen to have both a lake and a river in Lake Oswego, so waterfront is an important part of our market. To look at waterfront averages, I went back 6 months in order to have enough properties in the study to make it useful. I found a low per square foot of $73 (OK, that is just amazing!) and a high of $571. The average sold price per square foot was $287.
Then there is the issue of measuring
With all of this emphasis on value per square foot, one of the realities is that measuring a house is not an exact science. Two highly qualified professionals can measure the same house and arrive at different numbers. Do you count a staircase twice? After all it exists on more than one level. Yet, it really is only floor space that is used as a single level. Then there are tricky floorplans with cut outs and overhangs that can not be measured from the ground. To measure, you end up doing estimates based upon other measurements of either the interior or surrounding walls that can be measured. I am currently involved in a sale that is new construction. The builder, based upon architectural plans, has a measurement of 3650 square feet. The appraiser who was at the house last week found a measurement of 3823 square feet. Just using the average in LO as I calculated above, that’s an additional value of $30,000.
Ultimately my perspective is that looking at price per square foot can be helpful, but it needs to be taken with some understanding that it is not an exact science. As a buyer or a seller, you also need to factor in the obvious things like age, condition, and location, but also how much do you love the house. Is it worth to you what is being offered? Because ultimately a house is worth what a seller is willing to sell it for and what a buyer is willing to pay for it. These are human decisions and not scientific ones.
Thanks for reading. Send us your questions and allow Linda and I to address them here. We would so much rather be writing about things that are of interest to you. Again, thanks for reading.