Not seeing a decline in demand.
And, define "older home" what age is older? In parts of the US we sell homes built in the 1700 & 1800's still, so define older 😉

That said, younger folks have unrealistic first time buyer expectations of their home and I suppose older homes would suffer for it.

Older systems, outdated floor plans,  expensive to fix or repair,  and some are haunted.  

Seems like many folks like the shine and size of the big new homes, I prefer the solid construction of the older homes.

I have not noticed a decline in demand for older houses. 

Probably the cost of fixing them, maintaining them. Outdated floor plans, size of older homes can also be a factor. Certainly new/newer construction can be more energy efficient, use better materials, etc.

Real estate is cyclic.  It is a sign of the times, and the cost of renovation vs move in ready.  

Lack of housing where I practice makes all homes pretty popular and in demand. What can you afford, what is available and the strong urge to stop renting keep it a seller's market @bozivak !

I belong to a FB group about "old houses" and I've seen lots of post with "getting" or "keeping" insurance lately.  One buyer couldn't get their financing because they couldn't get insurance on a 120 year old home.

Everyone in our area want updated kitchens and larger bedrooms

I am not seeing that in my area.  

Why do you think there is  less demand for older homes in your area.  How old are these homes>  Here in PHX old is relative.  That could be 1904 or 1974. Both are 'older' but holy smokes there is no less demand going on in my neighborhood.  And we're in the 70's and up years.   Our home was built in 1974 but you'd never guess that.....it's so far ahead of the normal 70's builds. FLW like.

I would imagine that it is functional obsolescence

insurance.  Can't insure it, can't buy it.

Certainly the age of the major systems including outdated plumbing, electrical wiring and ample power grid for all the new appliances, roof age, wood rot, foundations issues, termite damage, etc that could affect the ability to have home owners insurance. A simple item like an outdated not water heater can increase insurance rates. 

And all the issues stated by otbers, outdated floorplan, lack of closet space, room size, so many little times and added together they can make an older home more expensive to own and maintain. 

Not seeing a decline in my market area.

I don't have facts or access to any report on this, however, my professional opinion is that they are costly to repair & maintain plus the local governments put restrictions on those repairs, add-ons or remodeling. It reminds me of classic cars. Pretty distinct to look at but inside the car, under the hood & all the rest are outdated & lacking. You get memory lane

Here in Charlotte, I don't see that! I sell a lot of homes in the historic areas - and I live in one too! My take - those old homes have far better bones than the ones that are being built today. 

Also, here, those homes are the 'location' homes as they are close to everything Charlotte, they're walkable and they're just 'cool' houses!

Initially thought is maintenance, not an open floor plan, potentially higher utility costs just to name a few thoughts that come to mind.