Why do bigger houses have a lower cost per square foot?

    When it comes to building a house, buying a house, or selling a house, people are going to look at the cost per square foot. In theory, it's an easy way to compare one house to another. It's like looking for the cost per ounce when deciding what size of mustard or mayonnaise to buy at the grocery store, right?

    Not exactly when it comes to houses, because larger houses generally have a lower cost per square foot. Why? Because the bigger the house plan, all other things being equal, there are more square feet to spread the cost over.


    Let's say you have a $40,000 kitchen planned for your dream home. That cost includes everything in the kitchen—cabinets, granite countertops, flooring, appliances, lighting, etc. It's your dream kitchen.

    Put that kitchen in a house that's 2,000 square feet. That kitchen costs $20 per square foot of your total house. Now put that kitchen in a house that's 4,000 square feet. Same exact kitchen now costs $10 per square foot of your total house.

    Here's an insider secret to consider: the last square foot is the cheapest square foot.

    You can design a house plan with everything you want, and it comes out to 2,500 square feet. Now add three feet of width right down the middle, and that house is 2,800 square feet. That last 300 square feet is strictly living space. The only materials required are slab, frame, roof, drywall, paint, and carpet (or other flooring).

    Actual Price Highlighted2-01Square footage that results in strictly living space is the cheapest kind to build, but you're still adding square footage to the house and thus increasing its resale value. That's valuable square footage!

    Adding extra square footage will lower your overall price per square foot even as it adds to the overall cost to build. But if you choose basic living space for additional square footage instead of more expensive square footage (like kitchen or bathroom space), the lower cost per square foot works even more in your favor.

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