What does depreciation in real estate signify?

Depreciation in real estate specifically refers to a decrease in property value over time, making the first choice the correct answer. This decline in value can occur due to a variety of factors, including wear and tear, physical deterioration, changes in market demand, or obsolescence.

For real estate professionals, understanding depreciation is critical in determining property values, tax assessments, and the potential return on investment. It influences investment strategies, such as when to sell a property, and impacts financial calculations related to rental income, property taxes, and maintenance costs.

The other options do not accurately portray the concept of depreciation. A rise in property value reflects appreciation, not depreciation, while stable property values would not signify depreciation at all. Calculated rental income relates to the income potential of the property rather than its value decline. Depreciation is thus a fundamental part of real estate investment and valuation that highlights the importance of market conditions, property upkeep, and economic factors.