The Theory of Progression and Regression

Old growth neighborhood

The economic theory of “Progression and Regression” states that building a home that is valued substantially above other properties in the same neighborhood will most likely cause the newly built home to value downward toward the other properties.  This is sometimes called “overbuilding” because sometimes a homeowner will put additions or improvements on his home that are substantially better than his neighbors.

But the theory is called progression and regression because a home that is in a diminished condition in a better neighborhood will command a higher value.  Additionally it is possible for a neighborhood to reach a tipping point. In other words, if enough of your neighbors “overbuild” your house could increase in value due to the increase in value of the neighborhood.

In Northern Virginia, we see this in many neighborhoods in and close to Alexandria and Arlington.  For example,  in Del Ray, older working-class homes have been replaced by or improved to become pricier and much more luxurious. Lyon Park and the area surrounding Belle Haven is not the same neighborhood that I remember as a child.  Both of these areas have become much more exclusive.