Regression Toward The Mean
So in statistics (and I am no statistician by any means) there is this theory "Regression toward the Mean" which means, in essence if I understand it correctly, that over time performance tends to move toward the average.
So an athlete who typically runs a 4 minute mile who has a bad day and takes 6 minutes is more likely to be closer to 4 than 6 on his next run. (Yes, lots of variables-- its supposed to be a general guideline).
So does the same thing apply to real estate prices? It has long been common wisdom to buy the "worst house in the best neighborhood" on the grounds that the price of that worst house will tend toward the average price in the neighborhood with only minor fix-up.
But what if you had a "decent" neighborhood (i.e. not the ghetto) where all the prices seem low in a larger metropolitan area? Should the prices in that neighborhood, on average, move toward the average home price in the area?
Have a deal on 9 condo units that seemed really cheap until I pulled comps and figured out that they were only slightly under retail. Yet the apartments are very nice and the area is perfectly livable. In a metro area where average home prices are north of $100,000 would Regression Toward the Mean imply that these $40,000 condos should be due for a run-up in price?
If there is nothing else keeping the prices down (like large supply of condos, bad school system, higher taxes) go for it!