Casa Academy

Reviewed by Casa Academy and updated July 29, 2026 using the current DBPR checklist and Pearson VUE scheduling guidance.

Economic Obsolescence

Economic obsolescence is external depreciation caused by factors outside the property lines, such as neighborhood decline, adverse zoning changes, or loss of demand, reducing value even when the building itself is well maintained.

Exam context

Select economic obsolescence when the value loss comes from outside forces the owner cannot fix by remodeling. Functional obsolescence involves design flaws; physical depreciation involves age and condition.

External loss of value

A sound house near a closed factory or new landfill may suffer economic obsolescence because market demand drops. Owners cannot cure external obsolescence with interior renovations alone. Appraisers quantify it in the cost approach as part of accrued depreciation.

Contrast with other depreciation

Physical depreciation reflects wear and tear. Functional obsolescence stems from outdated floor plans or systems within the structure. Economic obsolescence is locational or market-driven. Exams may ask which type applies when traffic noise from a new highway reduces rents.

Examples

  • Employer relocation

    Apartment rents fall 20% after the area's largest employer moves out. Buildings remain structurally sound but suffer external economic obsolescence until the local job base recovers.

  • Environmental stigma

    Homes near a contaminated site sell at a discount despite clean interiors. Market resistance reflects economic obsolescence tied to perceived external risk.

Keep studying

Practice economic obsolescence questionsEnroll in pre-licensing

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