Ace the PSI New Jersey Real Estate Test 2025 – Unlock Your Property Power!

Economic obsolescence, also known as external obsolescence, refers to a decrease in property value caused by factors outside of the property itself. This can include changes in local market conditions, such as economic downturns, shifts in demographics, or the introduction of new zoning laws that affect property desirability. Factors like increased crime rates, reduced demand for certain types of properties, or proximity to undesirable features like highways can all contribute to this type of obsolescence.

In contrast, functional obsolescence pertains to the property's outdated features or designs that make it less desirable, physical obsolescence refers to the deterioration of the property's physical structure over time, and structural obsolescence relates to issues with the building's structural integrity or design flaws. These other types of obsolescence focus on internal property characteristics or physical conditions rather than the external market influences that characterize economic obsolescence. Thus, the answer accurately identifies the influence of external factors on property value.