California Real Estate Practice Exam

Which of the following most clearly describes the "Principle of Regression"?

1. Less desirable properties enhance the value of more desirable properties.

2. More desirable properties are adversely affected by less desirable properties in their midst.

3. None of the above.

4. Tomorrow evolves out of today, which came out of yesterday.

The correct answer is: Less desirable properties enhance the value of more desirable properties.

The "Principle of Regression" refers to the economic concept that more desirable properties can lose value when they are located near less desirable properties. This principle highlights the negative impact that surrounding properties can have on the value of a more desirable property. Therefore, the correct understanding is that the presence of less desirable properties can adversely affect the overall value of more attractive properties nearby. While the chosen answer discusses how less desirable properties might enhance the value of more desirable ones, it does not accurately reflect the essence of the principle. The principle illustrates that proximity to lower-quality properties can detract from the value of higher-quality ones, which aligns closely with choice that describes the adverse effects rather than enhancements. The other choices do not align with the definition of the Principle of Regression either. The concept of yesterday evolving into today and tomorrow pertains more to development and change over time rather than the direct economic interactions described by the regression principle.