This newsletter will go into detail about Price per square foot data, which has recently been added to the MAPropertiesOnline statistics page, and how you can use this data to understand the difference between some towns and to help identify price characteristics of a home.
The price per sq foot graphs available on the MAPropertiesOnline statistics pages show the average price per sq ft of a home with 3 different categories of data on the x-axis of the graph: the price of a home, the age of a home and the size of the home.
By reviewing this data for a town you can get a quick overview of the price characteristics of this town, and can compare this against the price characteristics of another town. For example, if you were trying to identify a town to live in, and had $1,000,000 to spend, then the price per sq ft data can help you identify how big a house you can expect to buy in that town. If you believe that you have to have a minimum of 4000 sq ft of living area in your next home, then you really shouldnt be looking in a town where the average price per sq ft is greater than $250, or you should be aware that homes may be quite rare in this category. If this is the case, then you may need to be prepared to compromise on some facet of a town in your home search - either the town may not be the right town for you to buy in, or you may need to look at a smaller home in that town, or you may need to increase your budget for your next purchase.
So what governs the price per sq ft for a town?
When we talk with folks about which town might suit them best for their next home purchase, we explain the three categories that play a large part in deciding which town will end up being the right town for you. The three categories are:
The price per sq foot statistic comes into play when talking about how much house you can buy for your money. For example, if you were to consider Lexington. In this town you have a very popular and highly ranked school system and the commute time into Boston is also favorable. The category you may have to compromise on when buying Lexington is how much house you can buy for your money, in other words, the price per sq foot of homes is high relative to other towns with different characteristics.
This comparison is better explained with an example. If you compare Lexington with Waltham - They both have a similar commute into Boston, but the Waltham school system does not have the same ranking or reputation as Lexington's school system even though they share a border with each other. Because of this you can buy more house for your money in Waltham because you are compromising on the school system.
This can be shown statistically.
When you look at the $500,000 price range in Waltham you can see that the average price per sq foot over the last 12 months is $248 per sq ft. Contrast this with the data for Lexington. You can see below that the average price per sq foot for the same price range is $345 per sq ft, just on $100 per sq ft difference. This is for two towns that share a border. The key differential being the ranking of the school system.
This can also be shown clearly using the graph of price per sq foot versus living area size.
The graph above shows the price per sq foot you would expect to pay for a given home size. For instance, for a 4000 sq ft home in Lexington you would expect to pay, on average, $306 per sq ft. When you review Waltham's data below you can see that for a 4000 sq ft home you would expect to pay $129 per sq ft - a considerable difference between the towns! This is what is meant when we refer to being able to buy a lot more house for your money in a town where you are compromising on either the school system, or the commute into Boston.
Let's look at the data in more detail. In any given band there are three (3) values - the minimum (the yellow line), the average (blue bars), and the maximum (the red line). In general, the maximum value shows you what you may have to pay for a home that is in a popular location in the town, is in great condition, has been well maintained, and/or has a good floor plan. The New Home Analysis statistics (another series of statistics that focus on new construction activity in a town) and show the price/sq ft for new construction and this is often very close to the maximum price per sq ft. Conversely, the minimum value shows what you may have to pay for a house in a not so popular location, is in poor condition, has not been well maintained, and/or has a poor floor plan.
Another piece of interesting data can be gleaned from the price per sq ft graph when compared against the age of the home. Its interesting to see that in Lexington, homes built in the 2000-2010 years have a significantly lower price per sq ft than homes built in the 1990's. Homes built prior to 1900 have a lower price per sq ft than the range of homes built after this point and only begins to drop off again in the 1970's.
It's important to add a qualifier here though. The data that is being represented by these graphs is data gleaned from MLS Living Area data point. Often the Living Area data point has additional components of finished areas included in the total, but yet other listings do not have these comparable finished spaces included in this figure. Both are valid. When an agent states the living area as a certain size they have to disclose how this figure was calculated if it is not just coming directly from public record, and the MLS listing will often include statements such as 'Includes 800 sq ft of finished basement', or 'Includes finished room above garage'. Other listings will state the sq footage of a home based on public record and make statements such as 'Does not include finished basement'. So, when reviewing the data to understand how a home is priced, it is really important to understand what figures are being compared against what.
This data is a good guide, but if you are using it to identify what to offer for a home, or how to price your home prior to bringing your home onto the market, it is better to look closely at comparable homes that have recently sold, bring everything back to one standard ie remove the finished components out of the living area size, and compare 'apples to apples' to understand how the home is priced, or to be priced.
If you would like an estimate of what your home would sell for in today's market I would be more than happy to come by, have a look at your home, and then provide a CMA (comparative market analysis) which will provide you with an estimate of what your home should sell for, along with a marketing plan to get maximum exposure for your home.
If you'd like to chat more about the topic presented here, or the Real Estate market in general, then please call me on (617) 997 9145, or email me at Dani.Fleming@MAPropertiesOnline.com.