A key home price metric has skyrocketed since 2019

A report released Wednesday by Realtor.com shows that a key measurement of U.S. home values is growing faster that the more commonly viewed metric of listing price.

The analysis revealed that, across the 50 largest U.S. metro areas, price per square foot rose by 52.7% during the five-year period ending in May 2024. By comparison, the national median list price for a home jumped 37.5% during the same period to its current level of $442,500.

“The price-per-square-foot metric is an important one to pay attention to,” Realtor.com senior economist Ralph McLaughlin said in the report. “The change in that metric is a more solid measure of how much more a home is worth over time than looking at changes in median list price.”

The report goes on to explain that “price per square foot is a crucial metric in real estate because it allows for easy comparison between different properties, regardless of their size.“ Buyers, sellers and agents can then assess whether a property is priced appropriately based on factors such as location and condition.

Cara Ameer, a Coldwell Banker agent who is licensed in California and Florida, said in the report that price per square foot is just one of the many data points that stakeholders in the transaction should look at.

“Price per square foot can really be deceiving,” Ameer said. “A smaller home can have a higher price per square foot versus a larger one, and that can skew the numbers.”

She advises agents to help their clients focus on comparable listings. This will provide a more holistic view of individual homes and neighborhoods through overall condition, recent upgrades, location, lot size and more.

“The median list price can fluctuate even if the market is stable,” McLaughlin added. “For instance, an increased share of smaller homes on the market could lower the median list price without affecting the overall value of homes.”

Among the 50 largest U.S. metro areas, Realtor.com found that homes in New York City, Boston and Nashville led the way with respective appreciation rates of 84.7%, 72.9% and 68.6% from May 2019 to May 2024. Conversely, the metros with the lowest per-square-foot returns were led by Detroit (23.2%), Baltimore (24.8%) and San Jose (26.3%).

The soaring prices in New York City and Boston can mostly be chalked up to a post-pandemic “shift in working norms,” according to Realtor.com senior economic research analyst Hannah Jones.

“As remote and hybrid work arrangements became more common, buyers flocked to areas that offered bang for their buck within a reasonable commute,” Jones said.