Industry News

Second-home owners may focus less on primary residences

Harvard study finds age is key factor in owning multiple properties

Learn the New Luxury Playbook at Luxury Connect | October 18-19 at the Beverly Hills Hotel

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...