Sales price per square foot

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Sometimes real estate prices are determined by the price of each square foot. This allows for a better comparison between differently priced homes as well as homes of different sizes. In this pricing measurement method, the median or mean price of a home is divided by its square footage. For example a 1,243 sq ft. home was for sale for $465,000. To find the per square foot price the price of $469,000 is divided by the square footage of 1,243, the result $374.09 is the price per square foot for this particular home.

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To effectively compare neighborhoods the mean or median home price of a neighborhood is divided by the mean or median square footage. To refer to our example of Williowood Town homes in Salinas, CA, all units in Willowood range from 1,243 sq ft. to 1,621 sq ft. The first four units are all 1,243 sq ft. the fith units is a little larger, measuring 1,621 sq ft. The square footage of all units combined is 6,593 sq ft., this number is divided by five, the number of homes for sale, and the result, 1,318 sq ft. is the mean square footage. Now the mean price for townhouses in Willowood of $467,600 is divided by the mean square footage of 1,318, the result is $354.78. Thus the mean price per square foot in Willowood in March of 2006 was $345.78 per square foot.

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Rent per square foot

Rent is also often calculated by square foot. The rent per square foot is often used as an effective tool in comparing tenements and different markets when units are of different sizes. For example, in March 2006 a 1,600 square foot single family home in Aptos, California featured a monthly rent of $1,800 a month. In order to find the rent per square foot the rent of $1,800 is divided by the square footage of 1,600, which equals $1.12. Thus the rent per square foot for this particular rental home is $1.12 per square foot.
Another 1,140 square foot home is Aptos, CA featured a rent of $1,595 per month. Again the rent of $1,595 is divided by the square footage of 1,140, which equals $1.40 per square foot. So, even though this home features a lower overall rent, its rent per square foot is actually higher than that of the first home.

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