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It means that the neighborhood (in terms of quality) is decreasing greatly.
For example,if you see freshly cut grass on the parks suddenly dying and having a poorly maintained look and littered with garbage. And if you see things like Graffiti on the walls or trash everywhere,etc.
HOWEVER,it actually has very.....racial origins. Basically,it was shown as disapproval and disgust when a minority moved into predominately white neighborhoods.
This link basically explains it better with more elaboration(while still being understandable and to the point):
http://english.stackexchange.com/questions/59672/what-is-the-origin-of-the-phrase-there-goes-the-neighborhood-and-does-it-have
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