The Double-Edged Metric.
When trying to make heads or tails out of home values in San Carlos, many agents, appraisers, and clients alike resort to comparing the price-per-square-foot between different homes. And why not? Since the price per square foot is a “normalized” measurement — i.e., it’s derived simply by dividing the sales price of the home by the “marketed” square footage — it’s one of the only metrics that can be used to compare homes that are dissimilar in size, condition, and neighborhood.
But therein lies the hidden peril of using price per square foot when comparing homes. Not all homes are created equal, so one would expect that an recently remodeled or updated home will carry a higher price per square foot than an identical sized house that’s in original circa-1950’s condition. Also, price per square foot is not a linear relationship with home size. Generally speaking, smaller homes carry a higher average figure than larger ones — a 1,000 square foot home that sold for $725,000 equates to $725/sq foot. But if you apply that metric to a 3,000 square foot home, the price should then come out to be $725 x 3,000 = $2,175,000. Um… not in San Carlos!
Looking at it from the other direction, a $500/sq foot figure might be a great price for that 3,000 square foot home, but will the owner of the 1,000 square foot home be happy with a $500,000 price? Probably not.
There are a couple of reasons why price-per-square foot is not linear across house sizes. First — the smaller the home gets, the more the “dirt” value of the property comes into play, and the size and condition of the house factor in. Second, larger homes tend to be dominated by “lower cost” square footage, such as cavernous family rooms, bedrooms, and living areas. The bulk of the cost of larger homes is found in the kitchen and bathrooms, which are a small percentage of the total square footage.
With those cautions in mind, let’s take a peek at some square footage figures over the past 12 months:
San Carlos and White Oaks $/sq foot.
The first chart below shows the average price per square foot for all homes sold in San Carlos over the past 12 months:
…and here’s the exact same chart for homes in the White Oaks and Oak Park neighborhoods (area 352) …
What Do These Charts Tell Us?
- Homes are more expensive on a price per square foot basis in White Oaks and Oak Park than in San Carlos as a whole. This should come as a surprise to absolutely no one.
- The average price per square foot in all of San Carlos in the most recent quarter (April-June) dropped 0.2% compared to the same period in 2010.
- The average price per square foot in White Oaks and Oak Park in the most recent quarter dropped 3.3% compared to the same period in 2010.
These trends are yet another example that confirms what what we discussed almost ad nauseum in the previous posts: Home prices have been edging lower in San Carlos over the past year.
A Bonus: Blog reader Adam asked for the price-per-square foot data for just those homes that fall into the White Oaks School boundary. Since this software program doesn’t get to that granular of a level, I extracted the raw data manually (taking out the non-White Oaks homes). That raw data can be downloaded here: White Oaks School Boundary Sales
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