Is Price Per Square Foot a Reliable Valuation Tool for the Sedona Residential Market?
By Elisa Andreis J.D.,
Russ Lyon Sotheby’s International Realty of Sedona
Sedona AZ (July 12, 2013) – Square footage represents the quantitative attributes of a home while ignoring the quality of a home.
Qualitative factors include location, age, number of bedrooms, condition, lot size and improvements.
Price per square foot is a valuable tool when applied to specific local markets, particularly in homogenous communities and neighborhoods. Examples of homogenous residential communities are developer owned subdivisions, condominiums, townhouses and multi housing developments.
By contrast, Sedona has a wide range of mostly inconsistent neighborhoods in unique and diverse geographical settings, where mobile and manufactured homes can be found close to upscale subdivisions. Therefore the price per square foot approach by itself is unreliable and often misleading when comparing individual homes unless it is applied in the right context.
Price per square foot can be very useful to:
- Identify which price segments of the Sedona market are leading and which price segments are lagging
- Get a snapshot of our local market condition and make a better educated decision in the buying and selling process.
This first chart shows the average price per square foot by price segment in the Sedona residential market, based on homes sold from 2004 to 2013 (year to date as of end of June).
Contrary to most markets, price per square foot in Sedona increases with price, most noticeably in the luxury high end residential market.
The second chart is a composite scatter plot showing the relationship between the price per square foot and the sale price of homes in Sedona during the past six months, from January 1st to June 30th 2013.
The red straight line is the linear trend.
The scatter plot illustrates at which price points the Sedona market has been most active during the first half of 2013 and the trend line clearly confirms increase in price per square foot with increase in price.
The next chart looks at the composite relationship between the price per square foot and the square footage of homes sold in Sedona during the past six months, from January 1st to June 30th 2013.
The scatter plot shows an average standard deviation in price per square foot of 170%. The deviation is found rather consistently in homes of all sizes.
Important Takeaways
A- Price per square foot by itself is an imperfect valuation tool as it misses out on the tangible and intangible qualities of a home.
B- Four general rules that are specific to the Sedona residential market:
- The more expensive the home is, the higher its price per square foot
- The lowest priced homes sell for the least price per square foot
- Homes of any size sell in an extremely wide range of prices per square foot
- When used as a comparative valuation tool, price per square foot is only meaningful within similar and consistent neighborhoods
For more information about Sedona Real Estate and to search for properties, visit www.SedonaFineHome.com or call Elisa Andreis J.D. (928) 274 1521.
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1 Comment
Thank you! As a professional home inspector, former Arizona-Certified Residential Appraiser, current Hearing Officer for the Coconino County Board of Equalization and former builder; I congratulate you on calling into question the almost knee-jerk practice of looking at cost per square foot as an indicator of almost anything about the value of residential real estate.
Any intelligent, practiced builder will confirm that the cost per foot of kitchens and bathrooms is often several times that of cost per foot of a “great room” or living room. Given that fact, how can a “homogenized” single “price per square foot” be a meaningful indication of any building’s value?