Tried and (Sort Of) True.
There are numerous methods used to determine the present value of a home, or to compare the relative value of a home with that of others in the surrounding community. For better or for worse, the one method that is by far the most widely used for this purpose is to compare the price-per-square-foot. It’s one of the first calculations that Realtors and savvy home buyers make when they see a new listing on the market. Why? Because price per square foot is the lowest common denominator — it’s the only thing that all homes have in common.
We have become so accustomed to using price per square foot that anyone who is remotely connected to the real estate market can tell you what’s considered a high, low, or average price per square foot in San Carlos. And when you look up a listing on most third party websites like Redfin, the figure is already calculated for you. Trulia issues a weekly “average price per square foot” calculation in their data feed.
Do we put too much emphasis on price per square foot in San Carlos real estate? Yes, and here’s why…
Apples and Oranges.
Price per square foot comparisons are far more useful in planned communities or subdivisions where the homes are very similar in size, layout age, and condition. They don’t work as well in towns like San Carlos where the condition and style of homes can vary widely, even on the same block! Some homes are in their original circa-1940’s condition, while others have been extensively updated. Not all homes are created equal.
The other glaring flaw with this metric is that it’s non-linear — it doesn’t scale across the spectrum of home sizes. For example, the $700/sq foot mark is easily achievable for a 2BR/1BA 1,100 square foot home. But if you apply that same watermark to a 3,000 square foot rancher, you come out with a price of $2.1M. Hmmm…not in San Carlos.
So what’s the proper formula for applying price per square foot? At what point does it shift from $700 to $600 to $500? The answer is that there is no answer. It’s such a one-dimensional way to measure value that you have to inject a whole bunch more information for it to make sense. But for the purpose of looking at general trends, it serves the purpose pretty well.
$/Square Foot Trends in San Carlos.
So why the big disclaimer on this topic? What’s up with the dissertation? A couple of weeks back, blog reader Ken asked if I would publish the price-per-square-foot averages for the different neighborhoods. It was a great suggestion, and I have indeed posted individual graphs below of price per square foot data by the different zones of San Carlos. While there’s some great data in these charts and it’s logical to draw some conclusions from what you’ll see below, I thought it was important to highlight the inherent inaccuracies of this type of analysis.
So here it is — the price per square foot data for the 6 real estate zones in San Carlos. There are calculations at the bottom of each graph. To the surprise of absolutely nobody, prices climbed significantly in White Oaks and Howard Park. There was a slight uptick in prices in Beverly Terrace. Cordes had a decrease of over 7%, and the calculations on Clearfield Park and Alder Manor are meaningless, since they each had months during the period where no sales took place.
El Sereno Corte (aka White Oaks)
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