In real estate affairs, depreciation, properly so called, applies to buildings or improvements only, and not to the land itself. It is true that land values frequently decrease, but such decrease is seldom brought about by natural causes. Perhaps it is the result of a fictitious initial value, as in the case of a punctured "boom"; perhaps of a change of fashion, which prevents the old-time rents from being realized. These human causes, however, do not imply change in the land itself, but merely show that the original estimate of the value was excessive or that the demand has diminished.

As the process of depreciation in the case of buildings is constant and unavoidable, it must be dealt with in some way. If no notice is taken of it, and the property is not sold, the owner may be unconscious of it until a sale is attempted or a fire occurs. Then he discovers that the prospective purchaser or the insurance adjuster, as the case may be, will deduct for depreciation some material amount from what the owner considers the present, but which is really the original, value of the property.