patrick.net

Hi,
it depends on land value. The total price of the house is land value + improvement value. In a place where land is relatively cheap (Texas, CA central valley, Midwest), then yes, it will be fairly linear. Where the land is expensive (NY, Silicon Valley), then the bigger house will be cheaper per square foot, because the land value is the same for a big house and a small house. (assuming same lot size).

in the extreme case, a place where buildable lots cost $1m (Los Altos, Palo Alto), you could have a 1950 1000 sq ft shack going for $1m. Looks like $1000/ft, but in reality the value is the land. Same lot, 2000 sq ft house, maybe goes for $1.5m, or $750/ft.

In my neighborhood of typical 900sq ft 2br houses, houses between 900-1500 are selling $20-$30 less per sq ft, than the larger homes that are over 1700sq ft.

Now I'm not sure if supply and demand are playing a factor in that or not. Back in the bubble those small homes sold at a premium, as people were buying anything, as to not be priced out for ever.

Now that RE is on the down swing, and larger houses are available in other neighborhoods. Those small bungalows sat in inventory unsold. Now it could be the smaller houses are moving for cheap because investors are snapping them up, as would home owners can't justify the cramped space at any price.

Larger houses in this community are doing a better job at holding value, because they are in demand. When they come on the market, they end up selling before they have to reduce the price per sqft to the level smaller units are going for.

Got it, thanks pals that makes sense.