How the Neighborhood Affects the Value of Real Estate
Now, most of us already know that the neighborhood in which a property sits can have an affect on real estate values — but many of us may not know exactly why. Aside of the real estate market itself, a neighborhood will have the most influence on real estate value. What drives neighborhood values? Several economic principles, such as conformity, regression, and progression.
Progression means that, basically, if there is a somewhat icky house next to a better one, the value of the icky house will be enhanced. That sounds great, but it also means that in a neighborhood of expensive houses, a cheaper home will get more expensive.
Regression is the exact opposite. One expensive, great house in a neighborhood of lesser ones will go down in value.
Conformity means just that — any improvements must be made to maximize the value, so in that way, they have to conform.