Which type of obsolescence occurs due to changes in consumer preferences or technology?

The correct answer is functional obsolescence, which refers to a decrease in property value due to changes in design, utility, or consumer preferences that render a property less desirable. This type of obsolescence can occur when new technologies emerge, or when consumer tastes shift, leading to outdated features or layouts that do not meet current market standards or needs.

For instance, a home with a traditional layout might become less appealing if modern buyers prefer open-concept designs. Similarly, properties that lack energy-efficient appliances or smart home technology may experience functional obsolescence because they do not align with the expectations of today’s consumers.

Understanding functional obsolescence is essential as it helps property owners and real estate professionals assess the impact of changing market dynamics on property value, allowing for timely upgrades or renovations to maintain desirability.