Economic Obsolescence

Last Updated: Jun 7, 2019

Created By :

Last Edited By :

Created On :

Economic obsolescence is defined as a form of depreciation, or an incurable loss in value, caused by unfavorable conditions external to the property itself, such as the local economy, economics of the industry, availability of financing, encroachment of objectionable enterprises, loss of material and labor sources, lack of efficient transportation, shifting of business centers, passage of new legislation, and changes in ordinances. EO also may be caused by a reduced demand for the product; overcapacity in the industry; dislocation of raw material supplies; increasing costs of raw materials, labor, utilities, or transportation, while the selling price remains fixed or increases at a much lower rate; foreign competition; legislation; and environmental considerations.