In some areas where houses were developed around similar times to similar plans this works.
But, for example, here in Berkeley the price per square foot can vary wildly based on the condition of the homes. We have 100 year old homes that are barely habitable next to completely remodeled ones that can sell for a difference of $200 per square foot.
This is why each property is valued on a sq. foot cost. It naturally includes the "depreciation" of the structure and the land cost.
1. empty buildable lot (with zoning restrictions on max # buildable sq. feet)
2. tear down (add demo fees and maybe requirement to retain existing foundation to avoid extra taxes).
3. rehab
4. new construction
Which is normalized by location... rehab may cost more then new construction depending on the location and if it was a flip.
A $1m tear down can become a $2m+ house, or 4-5 $500k condos.
But, for example, here in Berkeley the price per square foot can vary wildly based on the condition of the homes. We have 100 year old homes that are barely habitable next to completely remodeled ones that can sell for a difference of $200 per square foot.