What principle states that the value of the best home in a neighborhood will be lowered by the existence of inferior homes?

The principle of regression states that the value of a superior property is adversely affected by its association with properties of lesser quality. In essence, the market value of the "best" home in a neighborhood is pulled down toward the value of the surrounding, inferior homes. This occurs because the overall desirability and market perception of the location are influenced by the lower-quality properties, thus limiting the value potential of the superior property. This is a fundamental concept in real estate appraisal, emphasizing the importance of conformity within a neighborhood.

A. Anticipation: This principle posits that value is created by the expectation of future benefits, such as income or appreciation, not by current neighboring properties.

B. Contribution: This principle assesses the value an individual component (e.g., a new pool) adds to the property's total value, not external neighborhood influences.

C. Progression: This is the opposite of regression; it states that the value of a lesser-quality property is increased by being among superior properties.

1. Galaty, F. W., Allaway, W. J., & Kyle, R. C. (2020). Modern Real Estate Practice in North Carolina (10th ed.). Dearborn Real Estate Education. In Chapter 16, "Real Property Valuation," the principle of regression is defined as "the principle that the worth of a better-quality property is adversely affected by the presence of a lesser-quality property" (p. 335).

2. Appraisal Institute. (2013). The Appraisal of Real Estate (14th ed.). In Chapter 3, "The Valuation Process," the text explains, "The principle of regression holds that a higher-priced property will be worth less in a lower-priced neighborhood than it would in a neighborhood of comparable properties" (p. 42).

3. Ling, D. C., & Archer, W. R. (2018). Real Estate Principles: A Value Approach (6th ed.). McGraw-Hill Education. Chapter 7, "Valuation Using the Sales Comparison and Cost Approaches," discusses how the principles of progression and regression are applications of the broader principle of conformity, where properties achieve maximum value when they are similar to their surroundings (Section 7.4).