An expensive home that later became surrounded by cheaper homes would suffer a loss in property value attributable to Economic Obsolescence. Economic obsolescence is a form of depreciation caused by factors that are not on the property, in the property, or even within the property lines. It can be caused by factors like the neighborhood experiencing a rise in crime. It can also be caused by economic factors such as problems in the job market. A recession or economic depression that reduces property value can also be categorized as economic obsolescence. In the question the expensive home is losing value because of cheaper homes surrounding it. Because that is a factor outside of the property line it would be Economic Obsolescence.
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