When you’re looking at homes to buy,Buying the Less Expensive Home in a Neighborhood Articles be sure to keep in mind the basic real estate principles of progression and regression. In a nutshell, these principles state that it is better to buy a lower priced home in a neighborhood of varying real estate prices.
In a neighborhood where home prices vary, the lower priced homes will increase in value because of the higher priced homes. The more expensive homes raise the property value of the less expensive homes. This idea is called the principle of progression.
On the other hand, the more expensive homes “go down in value” because of the less expensive homes. These higher priced homes will not literally depreciate in value because of the other homes. After all, real estate almost always goes up steadily in price. The more expensive homes in the neighborhood will still appreciate, but their prices will not go up at the same rate as if the homes were separate from the others. This idea that lower priced homes bring down the value of higher priced ones is called the principle of regression.
These real estate principles deal mostly with different home prices, but the same is usually true when comparing neighborhoods with different home types. Home types and home prices are often correlated. For example, single family homes are typically more expensive than town homes. If you are considering buying a condo or a townhouse, you may want to consider neighborhoods that also have single family homes. According to the principle of progression, your townhouse or condo should appreciate at a greater rate because of the single family houses around it. The real estate principles of regression and progression are a good example of how a home’s surroundings can impact the home’s value.