What does Economic Obsolescence refer to in property assessment?

Economic Obsolescence refers to a reduction in property value that is attributable to external economic factors rather than issues inherent to the property itself. This type of obsolescence occurs when circumstances outside of the property—such as changes in market conditions, economic downturns, the loss of attractiveness of the property's location, or surrounding properties declining—adversely affect the value of the property.

In property assessment, understanding economic obsolescence is crucial for appraisers and assessors because it helps them evaluate a property's worth more accurately in the context of external influences. Unlike physical obsolescence, which is related to the deterioration of the property itself, economic obsolescence recognizes that value can be impacted by broader economic conditions and not just the property's condition. Therefore, when appraisers consider economic factors, they can provide a more comprehensive and fair assessment of property values.