Price Per Square Foot: A Good Starting Point, But Not the Whole Story

When buying or selling a home, price per square foot is often one of the first metrics used to gauge value. While it’s a helpful starting point, it doesn’t tell the whole story. There are many factors that influence a home’s value beyond its size, and understanding these nuances can help buyers and sellers make smarter decisions.

Why Smaller Homes Have a Higher Price Per Square Foot

A common misconception is that larger homes should always have a higher price per square foot, but in reality, smaller homes often cost more per square foot than larger homes.

Consider two homes in the same neighborhood:

• A 1,500 sq. ft. home with 4 bedrooms and 3 baths

• A 3,000 sq. ft. home with 4 bedrooms and 3 baths

Both homes have the same number of bedrooms, bathrooms, appliances, and fixtures. They also both have a foundation, a roof, a kitchen, and the same number of plumbing and electrical hookups. However, in the larger home, these high-cost features are spread over twice the square footage, making the price per square foot lower. In contrast, the smaller home’s costs are concentrated into fewer square feet, driving the price per square foot up.

One-Story vs. Two-Story Homes: The Cost Difference

Another major factor in price per square foot is whether a home is one story or two stories. In general, one-story homes are more expensive per square foot than two-story homes due to:

✔ Foundation & Roof Costs – The foundation and roof are two of the most expensive components of a home. A one-story home requires double the foundation and roof area compared to a two-story home of the same square footage, making it more expensive to build.

✔ More Land Usage – A one-story home spreads out horizontally, requiring more lot space. This can drive up costs, especially in areas where land is expensive.

✔ Higher Construction Costs – Since everything is on one level, one-story homes require more materials for exterior walls, plumbing, and electrical work, increasing their overall cost per square foot.

Two-story homes, on the other hand, make better use of vertical space, reducing foundation and roof costs per square foot, making them more cost-effective to build.

Other Factors That Influence a Home’s Price Per Square Foot

Beyond size and layout, several other factors impact the true value of a home:

✔ Location, Location, Location – The neighborhood, school district, and nearby amenities can dramatically affect price per square foot. Homes in high-demand areas naturally sell for more.

✔ Lot Size & Usability – A larger or more usable lot adds value, even if the home itself has a lower price per square foot. Corner lots, cul-de-sac lots, and properties with views often command higher prices.

✔ Upgrades & Finishes – Two homes with the same square footage can have vastly different price points depending on the quality of materials and finishes. High-end appliances, hardwood floors, and custom cabinetry will increase value.

✔ Age & Condition – Newer homes typically sell for a higher price per square foot due to modern construction, energy efficiency, and lower maintenance costs. However, well-updated older homes can also hold strong value.

✔ Market Conditions – In a seller’s market, low inventory can drive price per square foot higher as buyers compete for limited homes. In a buyer’s market, the opposite is true.

The Bottom Line: Use Price Per Square Foot as a Guide, Not a Rule

While price per square foot is a useful tool for comparing homes, it’s only part of the equation. Smaller homes often have higher per-foot costs, one-story homes are more expensive to build than two-story homes, and factors like location, lot size, upgrades, and market conditions all play a major role in a home’s true value.

If you’re buying or selling a home, it’s important to look at the big picture rather than relying solely on price per square foot. Working with a knowledgeable real estate professional can help you understand what truly determines a home’s value and make informed decisions in the market.

👉 Thinking about buying or selling in the Texas Hill Country? Let’s chat! I’d love to help you navigate the market and find the perfect home at the right price. 🏡✨

Photo Courtesy of Getty Images (mevans/GettyImages; Illustration by Hunter Newton/Bankrate)