Is Price Per Square Foot a Useful Measure?

Price per square foot is a useful piece of the puzzle.

One of the most overused metrics in real estate is price per square foot. But it’s not the golden rule you might think. If you’re going to rely on it, you better be comparing apples to apples—or in this case, properties to exactly the same kinds of properties - and in Marin most houses are very distinct.

When you’re throwing around price per square foot, you’re looking at way more than just the size of the house. You’re also pulling in things like lot size, lot usability, views, condition, upgrades, and more. And that’s not all. Economies of scale can change everything.

For example, the bigger the house, the lower the price per square foot tends to be. Why? Because when you add square footage, you’re often adding space that doesn’t cost as much to build (like extra bedrooms or living areas). But if the house is smaller, the price per square foot tends to skyrocket because buyers are paying for the same essentials in a smaller footprint. This is why comparing homes of different sizes using the same price per square foot metric is like comparing apples to oranges.

Contributory Value of House Size: Only Part of the Equation

The value contributed by that size is only a portion of the overall price because the market adjusts for a bunch of other factors. Buyers don’t look at it in isolation—they look at the full package: location, lot, amenities, and even how functional that space is. In Marin - especially in towns like Fairfax there are some very "interesting" layouts that have come about through years of ad hoc additions to basic original structures. Pricing these can be quite challenging.

When Should You Even Use Price Per Square Foot?

If you’re chatting with friends or casually talking about the market, sure—go ahead and throw around price per square foot. It’s simple, it’s quick, and it gives a rough idea. But when you’re setting a listing price or making an offer? Be careful. Leaning on that metric too much can get you in trouble - attracting buyers and if you do, when it comes to appraisal time. Your agent needs a deep understanding of local sales and the layout aspect, location and condition of properties that are being used as comparables.

Conclusion - Price Per Square Foot is a useful tool, but a knowledgable Realtor will be able to identify where a property might fall in a range of likely values.