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Palmer purchases and occupies a single family residence (SFR) as his primary residence. Seven years into his ownership, the city constructs a freeway two blocks away from his house. The new freeway increases traffic congestion in the area. Further, Palmer is able to hear the sound of the freeway while in his backyard. What is this situation an example of?

A Economic obsolescence.

Economic obsolescence is a loss in value of a property due to external factors and not due to the condition of the property itself. In this question, the construction of the freeway close to the owner’s house — an external factor — contributed to a loss in the value of the property. Answer Functional obsolescence relates to a loss in the property’s value due to outdated style or non-usable space. Answer Physical deterioration refers to a loss in the property’s value due to wear and tear, which is not referenced in the scenario of the question.