Home A and Home B are identical modest homes in the same market. Home A, on a street of similar modest homes, sold for $420,000. Home B, on a street of much larger, higher-priced homes, sold for $446,000 at the same time. Which principle explains the $26,000 difference, and which home does it describe?
Correct Answer
A) Progression, which raised Home B's price
Progression holds that a lower-value home tends to benefit from proximity to higher-value homes, which is Home B's situation. Regression applies to a superior home near inferior ones, but Home A sits among similar homes; Home B does not conform to its larger neighbors, so conformity does not explain its premium; and progression cannot apply to Home A, which has no higher-value neighbors.
Why This Is the Correct Answer
Option A is correct because progression says lower-value homes tend to benefit from proximity to higher-value homes. Home B is the modest home among larger, higher-priced homes, and it sold $26,000 more than its identical twin.
Why the Other Options Are Wrong
Option B: Regression, which lowered Home A's price
Option B says regression lowered Home A's price. Regression affects a superior home near inferior ones, but Home A sits among similar modest homes, so there is no inferior influence on it.
Option C: Conformity, which raised Home B's price
Option C says conformity raised Home B's price. Home B is a modest home among much larger, higher-priced homes, so it does not conform to its surroundings; its premium comes from those higher-value neighbors, which is progression.
Option D: Progression, which raised Home A's price
Option D says progression raised Home A's price. Home A sits on a street of similar modest homes, so it has no higher-value neighbors to lift it; the progression effect belongs to Home B, which sold for $26,000 more.
Progression lifts, regression drags
A modest home near better homes is lifted (progression); a superior home near lesser homes is dragged down (regression).
How to use: Use this to match a paired-sales price difference to the right principle and the right home.
Exam Tip
Identify which home is the lower-value one and which way its price moved; up means progression, and a superior home moving down means regression.
Common Mistakes to Avoid
- -Swapping regression and progression
- -Applying regression to a home that sits among similar homes
- -Attributing a surroundings-driven premium to the home's own features
Concept Deep Dive
Analysis
The paired sales hold the home constant and vary only the surroundings. The higher price for the modest home among larger, higher-priced homes is the market evidence of progression; the task is to name the principle and attach it to the right home.
Background Knowledge
Regression and progression are closely related to conformity. Under regression, the value of a superior property is adversely affected by inferior properties nearby; under progression, lower-value homes tend to benefit when located near higher-value homes.
Real-World Application
An appraiser values a small older house on a street now lined with large new homes. Paired sales show such houses sell above identical houses on ordinary streets, and she supports a location adjustment with that evidence.
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