What is the term for when the value of a more expensive home is held down by lesser homes in the neighborhood?

The term that describes the phenomenon where the value of a more expensive home is negatively affected by the presence of lesser homes in the neighborhood is known as regression. This concept is based on the principle that properties are influenced by their surroundings, and a home in a neighborhood with lower-value properties will tend to be valued less than it would be if it were situated in a neighborhood with more expensive homes.

Regression addresses how a disparity in property values can bring down the perceived market value of a higher-end home. Investors and buyers typically assess not just the individual property characteristics but also the attributes and values of surrounding properties. Thus, when a more expensive home is located in an area with many less expensive homes, its value does not reach its potential because the overall neighborhood drag affects buyer perceptions and willingness to pay a premium for that property.

This is contrary to the concept of progression, where the value of lesser homes can be positively influenced by the presence of higher-value homes nearby. It demonstrates the impact neighborhoods have on property valuation, emphasizing the importance of location and surrounding property values in real estate market behavior. Understanding these terms and their implications is crucial for appraisers who need to assess property values accurately according to market conditions.