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Testing some key assumptions - second home market early warnings

Fortune, in their April 28, 2008 issue, printed a little statistic that struck me as valuable in terms of the sort of data one could use to test assumptions, but which often go unnoticed.  They cite Dennis Gartman, of The Gartman Letter as noting that an American Research Group survey in March found that 16% of households have made summer vacation plans.  This is a big decline from last March, when 48% had such plans.

Gartman concludes that one implication of this is that fewer Americans will be renting holiday homes this year.  This in turn means that those who have purchased second homes and counted on rental income helping to finance them may be in for a big disappointment.  Indeed, if the rental income doesn’t come up to expectations, Gartment suggests we could be witnessing a “fresh selling panic.”

What I thought was particularly insightful about this piece is the way in which a small bit of data (a leading indicator if you will) can provide an early warning of a later difficult event.  If one were an owner of such a holiday home, you’d want to do some more investigation of whether the slowdown is likely to have an effect on your assets, and if so, start now to avoid the worst effects.  That’s the whole concept of using early warnings to test assumptions in a discovery driven way. 

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• Posted: Monday, April 21, 2008
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