Real Estate Terms

Economic Obsolescence Definition

If a new highway is built right next to a home, the noise could disincentivize people from wanting to live there. This is an example of Economic Obsolescence.

What is Economic Obsolescence?

Definition: Refers to the loss of property value due to external factors, meaning things off the property affecting the property’s value. Examples of causes of economic obsolescence can include:

  • Flight patterns
  • A busy highway
  • Rise in local crime
  • And More

Economic obsolescence can be caused by larger factors as well. For example, economic factors, such as a recession or depression. Or when a factory nearby closes, hundreds of people lose their jobs, and local properties drop in price. This is an example of economic obsolescence.

Economic obsolescence is usually unfixable by the homeowner. For example, if there is crime in the neighborhood, no one is expecting homeowners to dress up like a superhero and clean up the streets.

Economic Obsolescence is a form of depreciation. It commonly shows up on the real estate license exam. To read about another form of depreciation, read about Functional Obsolescence here.

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