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Second-home owners may focus less on primary residences

Harvard study finds age is key factor in owning multiple properties

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Those who own second homes are more likely to reduce spending on their primary residence relative to their income than those who do not own second homes, according to a study by Harvard University's Joint Center for Housing Studies. The study uses economic models to measure "income elasticity of demand," which is a gauge of consumer response in spending related to a change in income. For example, a decline in income may lead to a disproportionate rise in the quantity of inferior goods purchased and a disproportionate decline in the quantity of luxury goods purchased. A rise in income elasticity can describe a disproportionately high rise in spending for normal or luxury goods in response to a lesser rise in income. The study provided "compelling evidence that the choice to adjust (housing) consumption by adding a second home rather than by increasing the value of the primary residence must lower demand elasticities for primary homes among second-home owners even more," according to t...