I am completing the cost approach for a newly constructed single family home in a PUD. The foreclosure rate in this area is well above 50% of houses of similar condition and quality and an over supply issue (1/1/2008-today: LOTS: 80 listings/3 sales, SFR: 158 listings/25 sales). THE APPRAISAL OF REAL ESTATE Twelfth Edition, Chapter 14: The Cost Approach , pg. 363 states ”External obsolescence-- a temporary or permanent impairment of the utility or salability due to negative influences outside the property. (External obsolescence may result from adverse market conditions. Because of its fixed location, real estate is subject to external influences that usually cannot be controlled by the home owner, landlord or tenant.)” When is it appropriate to use external obsolescence for market conditions?