At what point does it make sense to steal space from that 4th bedroom to do something else with the square footage?

Or, to rephrase, what's the difference in home value of a 3-bedroom vs. a 4+ bedroom home of the same size? I thought it would make sense to see what the difference is, and to break it down by homes size. After doing many CMA's of 3-bedroom vs. 4-bedroom homes, my theory was that it would make little difference for smaller homes, but there might be a threshold in home size after which a 4th bedroom might offer a premium overall. 

I have compiled the following data and presented it BY HOME SIZE. There are two sets of data. The first set compared average sale price for 3-bedroom homes vs. 4+ bedroom homes BY HOME SIZE. The second set shows average price per square foot BY HOME SIZE.  

Limitations

  • Not all square footage is created equal. It really does depend on what you are going to do with the extra space. A buyer may see a lot of value in a master bathroom that can comfortably accommodate a king-sized bed. A buyer may also see a lot of value in a 2nd-floor laundry room if all of the bedrooms are on that floor. A buyer may not be thrilled with a 4th-bedroom turned custom closet, if adequate closet space is already available.
  • In creating the following charts, I did not have the option to compare 3-bedroom homes with 4-bedroom homes. Therefore, the closest I could do is 3-bedroom homes vs. 4-or-more-bedroom homes. Keep in mind that as the home size increases, we are more likely to be including more homes with 5+ bedrooms in the comparison. Still, I feel that these statistics are useful.

What the numbers show

Disclaimer: The charts below represent live data from the MLS, updated monthly. The following summary represents the findings of the data trends at the time this was published, in March 2019.

The days of the four-bedroom home bringing a premium price may be behind us. At the time of publication, these numbers show that four-bedroom homes are typically selling for LESS than the same-sized three-bedroom homes. In addition, the price-per-square-foot is higher on average for three-bedroom homes than for four-bedroom homes. There are several potential reasonable explanations for this:

  • Bedroom space is cheap, but the opportunity cost is high. Three-bedroom homes have the luxury of allocating more space to areas such as kitchens or more luxurious bathrooms, which cost a premium when compared to a plain old fourth bedroom (likely a contributing factor in the higher price per square foot of 3-bedroom homes). And most homeowners are recognizing those spaces as valuable (higher average sale price).
  • Even allocating that space towards larger closets or a well-placed office or den ("flex space") can provide value that homeowners who can forego the fourth bedroom appreciate.
  • Buyers who need that fourth bedroom may be willing to sacrifice more luxurious spaces for the needs of their family. A more practical choice is often necessary, if a fourth bedroom is needed.
  • The fourth bedroom often translates to smaller bedroom sizes. A master bedroom that can't comfortably fit a king-sized bed is one example of a trade-off that a 4-bedroom home buyer may have to make...and it's a sacrifice that most buyers are not willing to make unless they have to, due to the greater needs of the family and/or budget constraints.

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Comparing average sale prices of 3 vs 4+ bedrooms by home size - Oakland County MI

For homes in 1200-1499 square foot range

For homes in 1500-1749 square foot range

For homes in 1750-1999 square foot range

For homes in 2000-2199 square foot range

For homes in 2200-2399 square foot range

For homes in 2400-2599 square foot range

For homes in 2600-2799 square foot range

For homes in 2800-2999 square foot range

For homes over 3000 square feet

Comparing average selling price per square foot of 3 vs 4+ bedrooms by home size - Oakland County MI

For homes in 1200-1499 square foot range

For homes in 1500-1749 square foot range

For homes in 1750-1999 square foot range

For homes in 2000-2199 square foot range

For homes in 2200-2399 square foot range

For homes in 2400-2599 square foot range

For homes in 2600-2799 square foot range

For homes in 2800-2999 square foot range

For homes over 3000 square feet