Definition
Regression analysis uses statistics to quantify relationships between property characteristics and prices. It identifies value impact of each variable—square footage, bedrooms, bathrooms, age, etc.
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Regression analysis uses statistical methods to examine how different property variables (square footage, age, number of bedrooms, etc.) correlate with sale prices. By analyzing many property sales, regression can identify the relative impact of each variable on price. This sophisticated technique helps establish adjustment amounts based on actual market data patterns. Regression analysis is increasingly used in mass appraisal and automated valuation models but requires careful interpretation.
Pro Tip
Understand that regression analysis quantifies average market relationships. Individual properties might create different value impacts.
Example
Regression analysis of 200 recent home sales in a market reveals that each additional square foot adds $150 to value, each bedroom adds $8,000, and each bathroom adds $10,000. These relationships inform adjustment amounts in appraisals.