Which principle states that the value of a larger house may be negatively affected when located in a neighborhood of smaller homes?

The principle that the value of a larger house may be negatively affected when located in a neighborhood of smaller homes is known as regression. This principle suggests that the value of a property decreases when it is surrounded by less expensive homes. In real estate, this phenomenon occurs because buyers are often influenced by the comparable properties in the vicinity. When a larger home is situated in an area where the majority of homes are smaller and less valuable, it can create an imbalanced perception of value, leading to a lower appraised worth for the larger property.

On the other hand, the principle of progression operates in the opposite direction; it suggests that the value of a smaller home may increase when it is located among larger, more expensive properties. Supply and demand focus on market dynamics affecting property values based on availability and buyer interest, while anticipation considers the expected future benefits or values that a property may provide. Understanding these principles helps real estate professionals assess property values accurately based on their context within the neighborhood.