If the houses are otherwise similar (similar upgrades, built around the same time, same size lot, same street, etc) then the smaller house should ALWAYS be more per square foot.
Here’s why :
SFR real estate has two components:
1. Structure
2. Land
In San Diego the Land typically accounts for 30% – 70% or more of the real estate value.
So, let’s do a thought experiment …
Take a plot of land that costs 150K and consider it with a 2500 square foot house. The structure might be worth 375K in its current condition.
Now consider another structure instead, this time 1500 feet. This one is the same quality and make up of the 2500 sf place so in its current condition is worth roughly the same amount per square foot as the larger structure for a total of 225K.
So, the property with 2500 sf house is worth maybe 525 K, whereas the property with the 1500 sf house is worth maybe 375K.
IN per-square-foot terms, the larger property is $210 per sf where the smaller property is $250 per square foot.
All things else being equal, smaller houses are worth more per square foot as long as the land value is greater than Zero.
