Sometimes real estate prices are measured 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 area. For example, a 1,243 sq ft (115.5 m2). home was for sale for $465,000. To find the per square foot price, the price of $465,000 is divided by the area of 1,243 sq ft (115.5 m2). The result, $374.09, is the price per square foot for this particular home.
To effectively compare neighborhoods, the mean or median home price of a neighborhood is divided by the mean or median area. To refer to our example of Villawood Townhomes in Salinas, CA, the sold units in Willowood range from 1,243 sq ft (115.5 m2). to 1,621 sq ft (150.6 m2). The first four units are each 1,243 sq ft.; the fifth unit is a little larger, measuring 1,621 sq ft (150.6 m2). The area of all units combined is 6,593 sq ft (612.5 m2). This number is divided by five, the number of homes for sale, and the result, 1,318 sq ft., is the mean area. The mean price for the sold townhouses in Villawood of $467,600 is then divided by the mean area of 1,318 sq ft.; the result is a mean price of $354.78 per square foot. This also includes the lot the home is built on (which varies in size).
In cities where condos, co-ops and to some extent townhomes and row houses are more prevalent, the prices do not include the land, since that is not owned by the indiviual but the entire association (though older town homes and row houses sometimes are not part of associations). The size of city lots are generally much smaller than those in the suburbs, measuring sometimes a mere 20 feet (6.1 m) wide for a 3 or 4 flat apartment building, with little to no land left for vegetation.
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