What is economic obsolescence?

Economic obsolescence refers to a decrease in the value of a property caused by external factors that are not within the control of the property owner. This can include various influences such as changes in the neighborhood, increased crime, deterioration of nearby infrastructure, or broader economic trends that negatively impact the desirability of an area.

For instance, if a factory that employs many residents in an area closes down, resulting in job losses and reduced economic activity, properties in that vicinity may experience a decline in value. This type of obsolescence is significant because it highlights the strong relationship between a property's value and its surrounding environment, emphasizing that external conditions can greatly influence property worth. In contrast, other options pertain to different concepts regarding property value or specific circumstances related to valuation methods or regulatory impacts, which do not accurately define economic obsolescence.