The Cost of Building a Home: How Does Price Per Square Foot Work
Price per square foot is a well-known measure of a home’s value, but it’s more complicated than it seems at first glance. Does the home with the lowest price per square foot offer the best value? Does a high price per square foot mean that a home is out of your price range? And can you estimate the cost of the home you want by simply multiplying the average price per square foot by the size of the house you want?
The answer to these questions might surprise you.
Let us break it all down so that you have a better understanding of how price per square foot factors into the true cost of a home.
What Goes Into the Price Per Square Foot?
You can calculate the price per square foot of a home by dividing the total cost by the number of square feet. It’s easy, but it doesn’t tell the whole story. The total cost of the home is based on some of the decisions that you make with regard to floor plans and materials used in the build.
Here are some of the things that can increase the price per square foot of a home:
- House size. Bigger homes usually have a lower price per square foot.
- Upgraded materials. More expensive materials (think granite countertops vs. laminate counters or hardwood floors vs. vinyl planking) increase the overall cost of a home, which drives up the price per square foot.
- Additional bathrooms or kitchens. These rooms cost more to build. For instance, a home that has 4 bathrooms will cost more than a home that has just 2.
- Location. All other things being equal, a home in Toronto is going to have a higher price per square foot than a home in Edmonton.
Given this, you can see that smaller homes are likely to have a higher cost per square foot because there’s a higher percentage of the home taken up by bathrooms and/or kitchens. Likewise, a home that has a lot of high-end features is going to have a higher cost per square foot than one that uses basic materials.
Why Should You Care About the Price Per Square Foot?
Price per square foot gives you a good idea of what you can expect to pay for a home. It also gives you a sense of whether or not a particular home is a good deal. The key to this, though, is that you need to be looking at homes of comparable quality.
For instance, if a home has a higher-than-average price per square foot for homes of a similar size, you should look into why. It probably has one or more additional features, such as a spice kitchen or an intricate stone patio surrounding the pool. If the home has a lower-than-average price per square foot, it could be a sign that there’s something wrong and the seller is looking to get rid of it quickly.
When Should You Be Careful About Using Price Per Square Foot?
When we’re talking about price per square foot, we’re usually talking about averages. You want to know how one home compares to others, but not all homes fit the average. Outliers can significantly impact the overall average.
At the time of writing, the average price per square foot in Edmonton is around $285. However, that figure includes one home that’s only $29 per square foot and one home that’s $5,656 per square foot – a huge range!
Additionally, you need to be careful when talking about new homes and the average price per square foot. If you’re using this figure to calculate the cost of your home, you could severely underestimate the cost of the home you want. An example of this would be if you were working with a builder who typically builds large family homes of over 2,500 square feet.
As we noted before, the higher the square footage, the lower the price per square foot. If you wanted to use this builder to build a home that’s only 1,200 square feet, your home is likely to be much more on a per square footage basis. The difference in cost could be tens of thousands of dollars.
At Sterling Homes, we are transparent, taking the guesswork out of it. We make it clear on each of our home listing pages what the price per square foot is, making it easy to compare with other homes on the market.
How Does Price Per Square Foot Affect Resale Value?
When it comes to resale value, people generally want to buy homes that fit in with the neighbourhood. As a general rule, it’s not usually smart to stand out. This means that you wouldn’t want to build a home with a lot of high-end materials in a neighbourhood where buyers are more cost-conscious. You won’t get that money back when you sell the home.
At Sterling, we’re dedicated to helping our buyers build homes that are “just right”. This means that they include all of the features that the buyers want, but that they also are comparable in style and price to others nearby.
How Can You Estimate How Much Your Home Will Cost?
The short answer here is that it’s almost impossible to get an accurate estimate of the cost of your new construction home from looking at the price per square foot. You need to tell the builder exactly what you are looking for in a home and have them give you an estimate based on those specifications.
Sterling Homes has the best price per square foot in all size bands and we’re always focused on providing our customers with value. We want you to move into a home that has equity to spare so that you’ll always be able to get more out of your home when it’s time to sell. Schedule an appointment to see how we can help you today.