If you’re expecting a third child, another bedroom may be a family necessity and the only real questions may be: can I afford to build the addition and can I obtain the permits.
However, if you’re wondering what financial value another bedroom may add to your home or if you’re potential buyer analyzing the upside potential of turning a modest sized home into a larger one, then “what is an extra bedroom worth?” is the real question. In this blog post I focus on adding a fourth bedroom to a three bedroom home in various San Francisco and Marin communities. The question is more clearly stated in two parts:
SINGLE FAMILY HOME – PRICE PER SQUARE FOOT
July 1. 2009 – August 31, 2010
San Francisco: Pacific Heights, Cow Hollow, Marina, Presidio Heights
3 Bedroom Homes: $842/sf
4 Bedroom Homes: $827/sf
San Francisco: Noe Valley, Glen Park, Castro, Corona Heights
3 Bedroom Homes: $672/sf
4 Bedroom Homes: $648/sf
It turns out that on average there was very little difference in value per square foot between three bedroom and four bedroom homes in these City neighborhoods. If anything, the findings may reflect the bias I referred to above I ran the numbers for an earlier period (7/1/06-8/31/07) and found similar results. Therefore adding a fourth bedroom in, say, Pacific Heights should increase the value of a home on average by $827 to $842/sf — the basic value of the additional square footage space. There doesn’t appear to be an extra “bedroom premium” under these facts.
Tiburon showed fairly similar results:
3 Bedroom Homes: $686/sf
4 Bedroom Homes: $683/sf
San Rafael as well:
3 Bedroom Homes: $447/sf
4 Bedroom Homes: $415/sf
A look within its city limits Mill Valley showed a different result.
City of Mill Valley (not incl. county neighborhoods)
3 Bedroom Homes: $563/sf
4 Bedroom Homes: $606/sf
It appears that Mill Valley buyers were willing to pay a premium roughly on the average of $43/sf ($606 minus $563/sf) for the fourth bedroom. The $43/sf amount is in itself not important except as a rough gauge of additional value in a four bedroom Mill Valley home. Note that this premium may have been even higher if you factor in the per-square-foot bias discussed above. This finding indicates that a substantial number of Mill Valley buyers were motivated to purchase homes that had the additional bedroom and is perhaps a comment on the demographics of the Mill Valley buyer and on that buyer’s pocketbook.
A bedroom premium also showed up in the sale prices of homes in the Sea Cliff, Lake, Jordan Park and Laurel Heights neighborhoods of San Francisco:
3 Bedroom Homes: $656/sf
4 Bedroom Homes: $701/sf
An even larger bedroom premium was found in sale data for these neighborhoods for the earlier period of 7/1/06 through 8/31/07.
The figures in this study are merely rough guides. They tell a story of relative economic facts, not absolute dollar amount conclusions. They are the result of averaging data. A specific home’s value may be below, at or above the averages shown. And you should know that the analysis of adding a third bedroom to a two bedroom home may yield vastly different results.
It’s generally understood that in the City and Marin, if you can obtain the building permits and the financing, you should benefit financially from the addition to your home of any well planned space to the extent that the total cost per square foot of government approval, construction and financing falls below the home’s value per square foot. However in certain neighborhoods the value of adding a bedroom may contribute a significant amount more to the value of your home.