California Real Estate Practice Exam

Depreciation is least affected by which of the following factors?

1. A change in value resulting from inflation or other positive economic forces

2. Obsolescence due to faulty design or inferior quality of construction

3. Obsolescence resulting from adverse external changes in the neighborhood

4. Value deterioration due to action of natural elements

The correct answer is: A change in value resulting from inflation or other positive economic forces

Depreciation in real estate refers to the decrease in an asset's value over time due to various factors. In this scenario, the answer implies that inflation or other positive economic forces have a lesser impact on the depreciation of a property compared to other factors mentioned. When inflation occurs, property values can increase because the overall economy is growing, and demand for real estate may rise. This positive economic climate typically counteracts depreciation by enhancing property values. On the other hand, the other factors listed—such as obsolescence from faulty design, adverse external changes in the neighborhood, or natural deterioration—are more directly associated with a decline in property value. These issues relate to the physical and functional aspects of the property and the surrounding environment, which can significantly reduce its worth over time. By recognizing the impact of positive economic changes, it's clear that such conditions can mitigate depreciation, making them the least influential factor in reducing property value compared to the other more detrimental influences.