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Why Do Smaller Houses Have A Higher Price Per Square Foot?

When you’re looking to sell or purchase a house, you might notice that smaller houses tend to have a higher price per square foot.

This information can seem counterintuitive at first, but looking into how price per square foot is calculated and what it means for your home can clear things up.

Why Do Smaller Houses Have A Higher Price Per Square Foot?

What affects the price per square foot?

Price per square foot is calculated based on a few factors. First, the overall price and value of the home must be figured out. The value of the lot is the first component of how much the house is worth.

The price of the home itself also includes things like how much the materials and builder’s fees cost.

Materials can include lumber, drywall, concrete, tiles, carpeting, bathroom fixtures, wiring and electrical items, plumbing materials, paint, and roof shingles or tiles. The cost of appliances must also be figured in.

Other factors, such as location, neighborhood, proximity to schools or parks, age of the home, and extra features such as a pool, garage, shed, or gardens, also affect the overall value of a property.

All of these things need to be assessed in order to determine the total value of the house.

white house with fenced yard

What are the most expensive areas in a house?

Kitchens and bathrooms are usually the most expensive parts of a home, as they require more plumbing and electrical work. The vanity, sink, bathtub or shower, and toilet in a bathroom also cost more than items in other rooms.

In a kitchen, the appliances and sink can be expensive, and this adds to the overall cost and total value of the house.

Other appliances, such as a washing machine and dryer, can also be expensive.

Amenities such as a pool, professional landscaping, a greenhouse, a shed or garage, or an irrigation system can also be costly to install, and they can add to the overall value of the home.

renovated kitchen

How do you calculate the price per square foot of a home?

Once you have taken all of the different factors about the home into account, you can add this up and, after considering the market and housing demand, find a total value for your home or future home.

From here, it’s simple to find the price per square foot.

All you need to do is divide the total value by the square footage of the house to attain the price per square foot.

House value / square footage = price per square foot.

Why do smaller homes cost more per square foot?

Even a very small home must still have at least one bathroom and a kitchen. Smaller homes also usually have all or most of the same appliances and amenities as larger homes.

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These areas and items are the most expensive parts of building a home, and they need to be figured into the total value.

However, if you’re dividing a large total value, with all of these relatively expensive items included, by a smaller square footage, you will often end up with a higher price per square foot.

For example, if a home has a value of $100,000 and is 1,000 square feet in size, the price per square foot is about $100.

However, a larger home, with 2,500 total square feet, might be worth double the total value, at $200,000.

When we figure out the price per square foot, though, we find that it’s $80, which is less than the price per square foot of the less valuable, smaller home.

It’s common for the larger home to be double the price but more than double the size.

small 2 story home

Why is the price per square foot important?

Price per square foot can’t always give you an idea of the total value of a house because it can be so drastically affected by the size of the house.

However, knowing the price per square foot of a home can still be useful when you’re purchasing or selling a home.

It’s especially useful if you know the average price per square foot of homes in your neighborhood or area.

Instead of telling you an accurate value of the house as a whole, price per square foot is an excellent comparison tool.

You can compare the price per square foot of your house to the average price per square foot in the neighborhood to see where your home or potential home stands.

If the price per square foot of your home is less than the average, it might be because it’s bigger.

However, if the houses are similar in size, the discrepancy can be because other houses in the area have recently been renovated or have upgraded appliances.

It can also sometimes point to other amenities that your home might not have.

If you’re planning to sell your home, you may want to look into increasing your price per square foot so that it matches the neighborhood or area average.

small home with several glass windows

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