In appraisal, what does the term "economic obsolescence" refer to?

The term "economic obsolescence" pertains to a decline in the value of a property that is influenced by external factors rather than the property's physical condition. This typically occurs due to changes in the market or economy that negatively impact the desirability or functionality of the property.

For instance, if a new highway is built that reroutes traffic away from a commercial area, businesses may experience reduced customer access, leading to a decrease in property values in that location. Other factors could include economic downturns, changes in zoning laws, or shifts in neighborhood demographics, all of which can strip a property of its perceived value.

The other options discuss aspects of property value that are related to internal conditions or local legal and physical attributes. Wear and tear from physical usage refers to the depreciation associated with a building's physical state. Outdated utilities and fixtures address obsolescence from a more tangible perspective tied to the property itself, while legal restrictions affecting property use concern zoning and land-use regulations that may limit the potential of the property but do not typically fit under the umbrella of economic obsolescence. Thus, the definition of economic obsolescence being a decline in value due to market changes makes this the correct interpretation.