What does the Principle of Regression state?

The Principle of Regression states that higher-quality properties can experience a decrease in value when they are situated next to lower-quality properties. This principle is rooted in the idea that the overall character and desirability of an area can significantly influence property values. When a high-quality property is adjacent to less desirable or lower-quality properties, potential buyers may perceive it as less valuable due to the negative impact the lower-quality surroundings have on the overall market perception of the neighborhood. Consequently, this decline in perceived value is a direct reflection of the principle of regression, emphasizing the interconnectedness of property values within a given geographic area.

Understanding this principle is crucial for assessors as they evaluate properties and determine fair market value, taking into account not just the individual characteristics of a property but also the influence of its surrounding environment.