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The future of mortgage is already here, and most people are still using 1990s thinking to evaluate 2025 real estate prices.
I was just reviewing appraisal data from our lending partners last week, and I keep seeing the same pattern. Buyers fixate on one number—price per square foot—then get blindsided when their offer falls through or their appraisal comes back different than expected. Look, I get it. You want a simple answer. A clean number. Something you can plug into a calculator and know whether you're getting a good deal.
Price per square foot is both incredibly useful and dangerously misleading at the exact same time.
By 2030, we'll see algorithmic pricing dominate residential real estate, but right now? We're stuck in this weird middle ground where buyers have access to mountains of data but lack the framework to interpret it correctly. The median U.S. listing price per square foot hit $226 in September 2025, according to Federal Reserve Economic Data. That's down from the $233 we saw in May 2024, which tells us something about market cooling in mid-tier housing.
That national number? It's almost meaningless for your specific purchase decision.
Think about it this way. If I told you the average American drives 54 miles per hour, would that help you plan your commute tomorrow? Of course not. You need to know your specific route, traffic patterns, weather conditions, time of day. Same logic applies here.
Price per square foot is calculated by dividing a home's sale price by its total square footage. A 2,000-square-foot home selling for $450,000 yields a price per square foot of $225. Simple enough, right?
Except here's where it gets interesting. When appraisers calculate this number, they're using gross living area (GLA)—that's the heated and cooled space above grade that's contiguous to the main house. They're not including finished basements. They're not counting detached apartments above garages. They're not factoring in bonus rooms accessed through unfinished spaces.
When you look at that $450,000 sale price, it includes all those features. The buyer paid for the finished basement. The seller's price reflected that detached studio. When you divide that total price by only the GLA, you're creating a price per square foot that includes value from spaces that aren't in the denominator of your equation.
I learned this the hard way back when we were scaling our appraisal coordination systems. Wait, let me clarify that—I didn't personally learn it the hard way, my team did when we had agents calling frustrated because their listing's price per square foot seemed high compared to comps. Turns out they were calculating total living space including basement, while appraisers were using GLA only. Two different denominators, two wildly different results.
The correct method—and this is standardized across the appraisal industry—is to divide sale price by GLA only. If a home has 1,500 square feet of GLA and sells for $300,000, the price per square foot is $200, regardless of whether there's a 500-square-foot finished basement adding value.
We're pioneering something that most real estate platforms won't tell you: price per square foot is essentially useless as a national metric because of massive regional disparity.
New England homes command $282 per square foot for spec-built, for-sale properties, according to October 2025 data from the National Association of Home Builders, accessed October 30, 2025. Down in the East South Central division—Kentucky, Tennessee, Alabama, Mississippi—you're looking at $140 per square foot. That's a 101% price differential.
The Pacific division comes in second at $223 per square foot. The South Atlantic? $147. And here's what's wild: those numbers are after excluding lot values, so we're talking pure structure pricing.
If you're relocating from Nashville to Boston, your dollar buys you half the space for the same money. Not because homes in Boston are objectively "better," but because land scarcity, local wages, construction costs, and demand dynamics create entirely different pricing paradigms.
This reminds me of when we were analyzing market entry strategies for different metros—the pricing disparities were so extreme that we had to build completely separate underwriting models for coastal vs. interior markets.
AmeriSave's mortgage experts can help you understand how regional price variations affect your buying power and loan approval in different markets across the country.
Here's a paradigm shift most buyers miss: price per square foot and home size have an inverse relationship.
A 1,000-square-foot home might sell for $200 per square foot. A 2,500-square-foot home next door could sell for $160 per square foot. Both are properly priced for their markets. How's that possible?
Because every home has fixed costs. The HVAC system costs roughly the same whether you're heating 1,200 square feet or 2,000 square feet—you're buying similar equipment. The kitchen, typically the most expensive room in any house, occupies similar square footage whether the total home is 1,500 or 3,000 square feet. Same with bathrooms.
When these fixed-cost components are divided across fewer total square feet, the per-square-foot cost goes up. Basic economics. You're amortizing the same kitchen expense across less space.
I just helped a family who got confused about this last month. They found a 1,400-square-foot home at $280,000 with a price per square foot of $200, and a 2,200-square-foot home at $396,000 with a price per square foot of $180. They initially thought the smaller home was overpriced. Actually, both were properly valued for their sizes. The larger home benefits from economies of scale in the cost structure.
In 10x improvement thinking, you have to account for what I call the "land value denominator problem."
When you calculate price per square foot by dividing total sale price by house square footage, you're including land value in the numerator but excluding it from the denominator. This creates mathematical distortion that gets worse as lot value increases.
Imagine two identical 2,000-square-foot homes. House A sits on a $50,000 lot. House B sits on a $200,000 waterfront lot. If construction costs are $300,000 for each structure, House A sells for $350,000 with a price per square foot of $175 while House B sells for $500,000 with a price per square foot of $250.
Same house. Same quality. 43% higher price per square foot, purely because of land.
Appraisers handle this by making separate lot value adjustments in their reports. They'll compare the lot, then compare the house improvements separately. But when consumers just look at price per square foot, they're smooshing everything together into one misleading number.
The future of mortgage underwriting demands precision, and finished basement square footage is where precision dies.
Here's the thing nobody tells you: a finished basement adds tremendous value to a home, but it contributes less per square foot than above-grade living space. Yet when many buyers calculate price per square foot, they include basement square footage in their denominator.
Big mistake.
A 1,500-square-foot main floor home with a 1,000-square-foot finished basement that sells for $400,000 looks like $160 per square foot if you include the basement (2,500 total square feet), or $267 per square foot if you calculate it correctly using only GLA.
Appraisers value the finished basement separately—maybe $30-50 per square foot depending on quality and market—then add that adjustment to the overall home value. But they don't include it in the price-per-square-foot calculation for the GLA.
When you're comparing homes, you must compare GLA to GLA, then make separate adjustments for basement finish, garage size, lot value, and other features. Lumping everything together produces garbage analysis.
Traditional lenders don't understand that a 1,800-square-foot home with high-end updates can legitimately sell for more per square foot than a 2,200-square-foot home with original 1990s finishes.
Size is just one variable. Condition is another. Quality is a third. They don't move in lockstep.
I was reviewing comp data for a refinance client recently. Three homes in the same neighborhood, all around 2,000 square feet. One sold for $380,000, one for $420,000, one for $450,000. The price per square foot ranged from $190 to $225—an 18% spread for similar-sized homes on the same street.
What explained it? The $450,000 home had renovated kitchen with quartz counters, new HVAC, updated bathrooms, and refinished hardwood floors. The $380,000 home had original everything. Both were 2,000 square feet. Completely different value propositions.
When you update kitchens and baths—typically the highest-value updates you can make—you're often adding $30-50 per square foot to your home's value without adding any square footage. New windows, updated HVAC systems, modern electrical panels, and other infrastructure upgrades add value that doesn't show up in square footage at all.
We're pioneering something that changes how you think about attached vs. detached garages in value calculations.
A three-car garage might add $20,000-40,000 to a home's value in most markets. That value shows up in the sale price, which means it gets included when you calculate price per square foot, even though garage space isn't part of gross living area.
So here's what happens: Two identical 2,000-square-foot homes, one with a two-car garage and one with a three-car garage. The three-car garage home sells for $30,000 more. When you divide by GLA, the three-car home shows a price per square foot that's $15 higher, even though the living space is identical.
By 2030, we'll see age-based pricing premiums reverse in some markets, but right now? Age impacts value in complex ways that price per square foot can't capture.
A 1920s Craftsman home might command a premium in historic neighborhoods for its character, solid construction, and architectural details. But it might also need expensive updates to plumbing, electrical, and HVAC systems. The price per square foot reflects both the positive (character) and negative (deferred maintenance) factors.
According to NAHB's October 2025 analysis, custom contractor-built homes started in 2024 showed median prices of $166 per square foot, up from $162 in 2023. But that's for new construction with no deferred maintenance and modern materials. Existing home price per square foot calculations include both the structure value and the accumulated deferred maintenance discount.
The future of mortgage is understanding that school boundaries are unofficial zoning that creates massive price per square foot differentials.
Same city. Same county. Two neighborhoods separated by a school district line. Homes on one side consistently sell for 15-20% more per square foot because of school ratings.
In some markets, being in a top-rated school district can add $50-100 per square foot to home values compared to a similar home in an average-rated district. That premium shows up in price per square foot, but it has zero to do with the physical structure.
Traditional lenders don't understand that price per square foot is a snapshot in time, not a stable value indicator.
When mortgage rates dropped below 3% in 2020-2021, price per square foot surged across the board as buyers competed for limited inventory. When rates climbed back above 7% by late 2023, price per square foot started declining in many markets as demand softened.
The July 2025 Census Bureau data showed median new home prices at $403,800, accessed October 30, 2025. That year-over-year decline hit price per square foot across the board, not because homes got worse, but because higher borrowing costs reduced buyer purchasing power.
We're pioneering something that architectural value can't be measured in square feet alone.
A 2,000-square-foot home with an open floor plan, good flow, and efficient use of space functions better than a 2,200-square-foot home with choppy layout, wasted hallway space, and poor room proportions. Buyers recognize this and pay accordingly.
Natural light, window placement, room sizes that accommodate modern furniture—all these impact what buyers will pay per square foot, and none of them show up in the basic calculation.
By 2030, we'll see real-time pricing algorithms adjust for market velocity. Right now? Time on market creates price per square foot variance that has nothing to do with home quality.
A home that sits on the market for 90 days and sells after two price reductions will show a lower price per square foot than an identical home that sells in 10 days with multiple offers. Both are the same house. Different negotiating dynamics, different outcomes.
Here's what traditional lenders don't understand: professional appraisers don't value homes by multiplying square footage times average price per square foot.
They use what's called the sales comparison approach, where they select comparable recent sales, bracket the subject property's features, and make individual adjustments for each meaningful difference. Square footage is one adjustment among many.
AmeriSave works with certified appraisers who follow industry-standard valuation methods to ensure your home's value is accurately assessed for your mortgage application.
Look, I'm not saying price per square foot is useless. It's incredibly useful when you use it right.
The future of mortgage is data-driven decision-making, but you need the right framework. Here's how to deploy price per square foot intelligently in 2025.
Pull comparable sales from the specific neighborhood or subdivision where you're buying. Ideally within a half-mile radius, certainly within the same school district. Filter for homes that sold in the last 90 days—180 at the absolute most if inventory is tight.
Calculate price per square foot for 5-7 truly comparable properties. Similar age, similar condition, similar lot size, similar features. Now you have a meaningful range.
If your target home falls within that range, the pricing is probably market-supported. If it's notably higher, you need to identify what specific features justify the premium. If it's notably lower, you need to understand what's missing or what condition issues might exist.
Let's say you're comparing two homes. Home A is 2,000 square feet at $400,000 ($200 per square foot). Home B is 2,200 square feet at $418,000 ($190 per square foot).
At first glance, Home A looks more expensive per square foot. But dig deeper. Maybe Home A has a fully finished basement (additional 800 square feet not in GLA), a three-car garage vs. two-car, and sits on a larger lot. Maybe Home B is on a busy road with no garage.
Do the math with adjustments. If the finished basement is worth $30,000, the extra garage bay is worth $15,000, and the larger lot is worth $20,000, Home A's structure is effectively $335,000 for 2,000 square feet ($167.50 per square foot) once you back out the non-GLA value. Now it's clearly less expensive than Home B on a structure basis.
This is how appraisers think. Break down the components, value each separately, then compare structure to structure.
The paradigm shift here is recognizing that price per square foot is a tool for professionals who know its limitations, not a consumer-friendly shortcut that eliminates the need for expertise.
A good REALTOR® will show you price per square foot data as one component of a comprehensive market analysis. They'll explain the outliers. They'll help you understand which differences justify price premiums and which don't.
Don't try to DIY complex valuation analysis armed only with price per square foot. It's one data point in a multidimensional analysis.
Look, the future of mortgage is smarter buyers using better data. But data without context is just noise.
Price per square foot gives you a starting point. A way to quickly assess whether a property is roughly in line with recent market activity in that specific neighborhood. It helps you spot outliers that deserve deeper investigation.
But it can't tell you whether a home is a good value for you specifically. It can't account for all the variables that make properties unique. It can't replace professional expertise from qualified REALTORS®, appraisers, and lenders who understand your local market dynamics.
The U.S. median listing price per square foot of $226 in September 2025 tells you something about broad market trends. The $282 per square foot in New England vs. $140 in the South tells you about regional economics. The spread between new construction and existing home pricing tells you about market dynamics.
But the real question is simpler than all that math: Does this specific home work for your family? Is it priced reasonably compared to truly comparable properties that sold recently in this micro-market? Can you afford the payment given today's interest rates?
Answer those questions first. Then use price per square foot to validate or challenge the pricing.
As of September 2025, the median listing price per square foot in the United States sits at $226 according to Federal Reserve Economic Data from the Federal Reserve Bank of St. Louis. This represents a decline from the $233 median we saw in May 2024, indicating some market cooling in response to elevated mortgage interest rates. The average is slightly higher, but I generally recommend focusing on median figures because they're less influenced by ultra-luxury outliers that skew the math. The national figure masks massive regional variation though, which is really what matters when you're actually buying a home. New England properties command $282 per square foot at the median, while East South Central states come in around $140 per square foot. That's more than double the cost in high-price regions, which tells you that national averages have limited utility for local purchase decisions.
The standard method involves dividing the home's sale price by its gross living area, which is the finished, heated and cooled space above grade that's contiguous to the main living area. For example, if a home sold for $450,000 and has 2,000 square feet of gross living area, you divide $450,000 by 2,000 to get $225 per square foot. The critical thing most people get wrong is what square footage to use in that calculation. Professional appraisers use only the gross living area—they exclude finished basements, they don't count garages, they leave out detached structures and bonus rooms that aren't part of the main house, and they don't include outdoor covered space like screened porches. When many buyers calculate price per square foot, they mistakenly include all finished space including basements, which produces an artificially low price per square foot that isn't comparable to appraisal calculations. If you're going to use this metric for comparing properties, you need to be consistent in how you measure the square footage across all properties.
Price per square foot differences between neighborhoods primarily reflect location premiums driven by school district quality, walkability and amenities, crime rates and perceived safety, proximity to employment centers, lot sizes and neighborhood character, and the overall supply-demand balance in each specific area. School district boundaries create some of the sharpest dividing lines in residential real estate—you can have two nearly identical homes separated by a school attendance boundary where the home in the higher-rated district sells for $50-100 more per square foot purely because of the school assignment. Established neighborhoods with mature trees, larger lots, walkable retail districts and strong neighborhood associations command premiums over newer subdivisions on the urban fringe, even when the houses themselves are similar quality. Job accessibility matters too—neighborhoods with short commutes to major employment centers get bid up relative to areas requiring longer drives. All of these factors influence what buyers will pay per square foot for similar physical structures.
Higher price per square foot can absolutely be justified depending on the home's characteristics and market context. Smaller homes naturally show higher price per square foot due to fixed cost distribution across less space—you're paying for the kitchen and bathrooms and HVAC system regardless of total home size, so those costs per square foot are higher in a compact home. Higher-end finishes, quality materials and extensive updates like new kitchens, renovated bathrooms, hardwood floors, and modern systems add value without adding square footage, pushing price per square foot higher for legitimate reasons. Desirable locations like waterfront properties, homes in top school districts, or properties in walkable urban neighborhoods with scarce land command location premiums that show up as higher price per square foot even when structures are similar. New construction typically runs 15-25% higher per square foot than comparable existing homes due to warranty coverage, modern systems, current code compliance and builder profit margins. The key is understanding whether the specific factors driving higher price per square foot represent features you actually value and are willing to pay for.
Price per square foot should be one data point among several when formulating your offer. The smart approach is to first analyze recent comparable sales in the immediate neighborhood—ideally within a half mile and from the last 90 days—and calculate their price per square foot using consistent methodology. This gives you a range that represents current market pricing for similar properties in that micro-market. If your target home falls within that range, the list price is probably market-supported and your offer should be based more on your enthusiasm for the property and current market conditions. If your target home is priced notably above the comparable range, you should investigate what specific features might justify that premium—is the lot significantly larger, are the finishes higher-end, is the condition substantially better, or is the location within the neighborhood superior. If you can't identify clear justifiers for the price premium, you've got reasonable grounds to make an offer below list price and you can cite the comparable price per square foot data to support your position. Price per square foot works best as a reasonableness check and a negotiating reference point rather than as a formula for calculating what your exact offer should be.
Appraisers calculate price per square foot as part of their analysis, but they don't use it as the primary method for determining value. The standard approach for residential appraisals is called the sales comparison approach, where the appraiser selects three to six comparable sales of similar properties that recently sold in the subject property's market area, then makes specific dollar adjustments for each meaningful difference between the comparables and the subject property. These adjustments cover factors like lot size, garage configuration, bathroom count, condition, basement finish, pool, view, location within the neighborhood and yes, square footage differences. After making all these individual adjustments, each comparable’s adjusted sale price should converge around a similar value range, and that range indicates the subject property's likely market value. The appraiser then calculates what price per square foot the concluded value represents by dividing the final value opinion by the gross living area, and uses that as a reasonableness check against the comparables. The price per square foot is calculated at the end of the process as a derived metric, not used at the beginning as a multiplier to determine value.
The median price per square foot is the middle value when you line up all the price-per-square-foot figures from recent sales in ascending order—half the properties sold for more per square foot, and half sold for less. The average price per square foot is calculated by adding up all the price-per-square-foot figures and dividing by the number of properties. The median is generally more useful for real estate analysis because it's not distorted by extreme outliers the way averages are. If you've got nine homes that sold for $180-220 per square foot and one luxury custom home that sold for $450 per square foot, the average gets pulled significantly higher by that one outlier while the median stays in the range that represents typical transactions. Real estate data tends to have significant outliers on both ends—there are always a few distressed sales or motivated seller situations that close well below market, and there are always a few custom luxury properties or bidding war scenarios that close well above typical pricing. The median filters out these extremes and gives you a better sense of what a typical buyer actually paid per square foot.
Finished basements create one of the most common sources of confusion in price per square foot analysis because they add significant value to a home but aren't included in the gross living area calculation that appraisers use. When a home has a finished basement, the sale price includes the value of that basement space—buyers pay extra for the additional usable square footage and the improvements the seller made to finish it out. But when appraisers calculate price per square foot, they divide the sale price by only the above-grade gross living area, which means the basement's value is included in the numerator but not the denominator of that calculation. This produces a higher price per square foot for homes with finished basements compared to homes without, even when they have identical above-grade square footage. For example, a 1,500-square-foot main floor home with no basement that sells for $300,000 shows $200 per square foot. An identical 1,500-square-foot main floor home with an 800-square-foot finished basement that sells for $330,000 shows $220 per square foot, even though the extra $30,000 in price is specifically attributable to the finished basement. When you're comparing properties, don't include basement square footage in your price per square foot calculations for the main house, but do account for it separately as an additive feature.
Online automated valuation models have improved significantly in recent years, but they still have meaningful accuracy limitations especially in markets with diverse housing stock and when property conditions vary substantially. These tools typically work by analyzing recent sales data in an area, calculating average or median price per square foot, then multiplying that figure by the subject property's square footage pulled from public records. They might layer in adjustments for age, bed-bath count and other basic features they can pull from tax records, but they can't account for condition, quality of finishes, updates and renovations, functional layout and floor plan efficiency, views and specific location within a neighborhood, or other property-specific factors that significantly impact value. In markets with very homogeneous housing stock like newer subdivisions where homes are similar in age, size and style, the estimates can be reasonably accurate—maybe within 5-10% of actual value. But in neighborhoods with diverse architecture, varying ages, and mixed condition levels, the accuracy degrades significantly and you might see 20-30% errors in either direction. These tools are best used as a starting point to get a ballpark sense of value, but they shouldn't replace professional analysis.
New construction typically commands a premium of 15-25% higher price per square foot compared to existing homes of similar size in the same market area, though this varies by location and market conditions. The premium reflects several factors including builder profit margins and overhead costs, new home warranty coverage typically lasting 1-10 years depending on the component, modern building codes and energy efficiency standards that older homes don't meet, brand new HVAC systems, appliances, roofing and other components with full useful life remaining, and buyer preferences for never-lived-in homes without anyone else's design choices or wear patterns. In markets with expensive lots, the new construction premium can narrow because lot costs are similar regardless of whether you're buying new or existing, and the structure differential becomes proportionally smaller. According to NAHB data from October 2025, new construction spec homes nationally showed median pricing of $153 per square foot excluding lot value. In markets where land is relatively inexpensive and builders are competitive, new construction might run only 10-15% more than existing homes. In land-constrained markets where lots are scarce and expensive, new construction premiums can reach 30-40% because new projects require expensive land assembly and typically get built in less-desirable locations farther from urban cores.
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