Rate today's boat market?

[backinblue]

Backinblue, I stated an opinion. Of course I cannot be certain. No one can.

No worries, you just stated it difinitively as if it were fact, that's all. All opinons are equal unless backed up by data. And of course you can always find data to back up any opinion anyway.

 

[kthoennes]

Boy, we financed our boat, although for a relatively short time, and only a fraction of the price, and at a relatively low rate and wrote off the interest as a second-home. Even in the first year though, that interest write-off was a drop in the bucket. Almost wasn't worth the accounting trouble. The difference it made in our tax liability wouldn't even fill the boat's gas tank. Granted if you're buying a half-million dollar boat (or more) and finance the thing, maybe taxes and interest will affect consumer behavior, but I'm not sure it'll have much influence. I'm always shocked at what people spend on new cars and six-figure pontoon or trailer boats, financing them for 983 months, long after depreciation flips the loans upside down.

 

[OldDan1943]

The tax code subsidizes folks of means who have the capital and income to purchase second homes. I wonder how many in Congress have second homes.

3rd or 4th homes....
put 2 in your name then put 2 in your spouses' name.

 

[catalinajack]

No worries, you just stated it difinitively as if it were fact, that's all. All opinons are equal unless backed up by data. And of course you can always find data to back up any opinion anyway.

Yes, my statements were definitive in nature. In the future I will state they are opinion. I do think, an opinion, that most folks would have understood that. Perhaps not.

 

[mvweebles]

For the record, the WSJ article I cited focused on Fed rate needing to remain high due to persistently elevated demand as evidenced by high savings rate. Rightly or wrongly, the reporting is that the Fed views strong labor market as a key indicator of entrenched inflation. There was no mention of how the savings came to be, just that, as a percentage of GDP, it's at a very high level.

There is a lot of separate reporting that consumerism for many people remains strong, Purchases of luxury and discretionary brands remains strong. I am one who believes the boat market is normally a buyers' market which has been defied for much longer than i could have imagined. Eventually, that will return but it will take longer than expected.

For purposes of the OP seeking insight into the current boat market, I found the WSJ article instructive to explain why the market appears to be sustaining strength - there are a lot of people flush with cash. And there are a lot of people with good jobs who can afford the boat they already have so no need to sell thus supply is constrained. Sure, some wealth came from government payments, but for buyers and owners of 6-7 figure trawlers, I doubt that moved the needle in comparison to other wealth accelerants over past 3 years .

Peter

 

[backinblue]

Peter, I agree but will add something to think about. Wealthy people did not receive COVID releif for the most part, and even those that did, a few thousand is not life-changing. But for those with wealth and are not financing, a bigger impact may be the stock market drop. People who felt comfortably wealthy last year may feel less so today if they lost 20% of their investment value. It may only be psycological in reality and again not life-chagning, but emotions pay a big part in purchasing decisions as well as discrecinary spending.

 

[smitty477]

Peter, I agree but will add something to think about. Wealthy people did not receive COVID releif for the most part, and even those that did, a few thousand is not life-changing. But for those with wealth and are not financing, a bigger impact may be the stock market drop. People who felt comfortably wealthy last year may feel less so today if they lost 20% of their investment value. It may only be psycological in reality and again not life-chagning, but emotions pay a big part in purchasing decisions as well as discrecinary spending.

While the pandemic was not a positive time at all I am aware of a number of small businesses that came out very well between landlord moratoriums, PPP loans, and deferred SBA. Some are boat owners.

 

[SteveK]

It has become a buyers market for boats. Those that may want to sell are not listing as they are still not willing to sell below what the value their boat attained in the past few years. Many have bought in the high price market. Many have annual moorage paid until spring, so there is no urgency. The moorage cost increases in the spring will add to more boats for sale.
I predict the spring will bring a flood of boats for sale and under pricing the competition will lead to lower boat prices. Not a good time to be selling a boat, unless you have to.

 

[backinblue]

For things like boats and homes, it's pretty irrelevant to time the market unless you are getting in or out for good.

 

[mvweebles]

I predict the spring will bring a flood of boats for sale and under pricing the competition will lead to lower boat prices. Not a good time to be selling a boat, unless you have to.

You would think this would be true, but it hasn't happened in housing. Sales have slowed, but average sales' price is still increasing due to limited supply. Now the big difference between boats and houses is that you don't need a boat, but you do need a place to live. Supply is partially constrained because people don't want to sell a house with a 3% mortgage and replace it with a 7% mortgage.

This morning, ADP reported 7.7% increase in wages....and payrolls expanded at 239k emplyees vs expected 195k meaning companies are hiring. For September, the Labor Dept reported 10.7m job openings against 5.8m unemployed people seeking work - a near-historic imbalance. Of course, unemployment is also at near-historic low of 3.5%. As linked in the WSJ article above, savings are historic highs too. This means people have a LOT of confidence in their work status.

There are definitely storm clouds on the horizon. Consumer confidence has dropped significantly in the last few quarters as inflation has become entrenched. I suspect second mortgages are a source for many boat purchases so interest rates will flatten that money source, though I must observe that we've been spoiled with near-0% interest for over a decade, so we are likely just adjusting to the old world where 7%-8% mortgages were normal.

In the end, people have jobs, and they have money. And they have confidence in continuation of both. Those are good signs for sales of discretionary items such as boats. The current data, barring a change, will mean the boat market slowly returns to earth - no burst-bubble. But who knows, I was one of those guys who, in Feb 2020, thought the sky was falling and my house would be unsellable for 5+ years. 24-months later I sold it for a ridiculous amount.

Peter

 

[smitty477]

For things like boats and homes, it's pretty irrelevant to time the market unless you are getting in or out for good.

Or if moving up or down.

 

[kthoennes]

It has become a buyers market for boats...

Boy, that's not my impression at all. Of course if you google search long enough you can find sources to support just about any perspective, but here's this one for example.

https://www.prnewswire.com/news-rel...ove-inventory-at-a-record-pace-301596374.html

I have read some articles too about a clear recent decline in boat registrations which can be an indirect indicator of sales and transfers, but even there they usually attribute it to manufacturing and supply chain delays which tend to raise prices even more. Might become a buyer's market at some point, but not yet from what I can see. Or this one. The formatting of this website is messed up, looks to me like a website that scrapes or republishes corporate statements but if you can plow through that distraction, they talk about a '22 Q3 sales increase of 32% and a 33% average price increase. Buyer's market?

https://www.marketscreener.com/quot...ANCIAL-CONDITION-AND-RESULTS-OF-OPE-42125890/

 

[SteveK]

kthoennes, I base my opinion on my local market. I have been trying to sell a GB36 since I bought the Bayliner 4588 in June
Of course I searched for the right boat and while doing so bookmarked several. On a weekly basis I check to see if they have sold, but find them not, I have not sold. To me a local sellers market is when there are more buyers than boats.
What I see on the sale end of the GB is the same boats for sale and new ones being added, prices dropping over last 4 months.
For a while I had a spreadsheet on these to track them, now I just click the links out of curiosity.

Again local market, the boat I purchased did not have another offer over the weeks it took to complete sale, so not sellers market. I was able to negotiate my price, buyers market.

 

[Eli27]

kthoennes, I base my opinion on my local market. I have been trying to sell a GB36 since I bought the Bayliner 4588 in June
Of course I searched for the right boat and while doing so bookmarked several. On a weekly basis I check to see if they have sold, but find them not, I have not sold. To me a local sellers market is when there are more buyers than boats.
What I see on the sale end of the GB is the same boats for sale and new ones being added, prices dropping over last 4 months.
For a while I had a spreadsheet on these to track them, now I just click the links out of curiosity.

Again local market, the boat I purchased did not have another offer over the weeks it took to complete sale, so not sellers market. I was able to negotiate my price, buyers market.

The woody?


Eli

 

[SteveK]

The woody?


Eli

Yes

 

[Adopo]

Just spoke to a friend who attended the FLBS, mind you he is not like most of us, looked at from 30 to 150 feet, after selling his 130ft Heseen last year.

Said the docks were as busy as ever and looks like things are still moving. That said I'm sure that maket feels the pain last, for some if ever.

Regarding below article, good thing we aren't a global economy. But then again it's just the same old negative Drudge Report lol.

https://www.bbc.com/news/business-63471725

 

[Art]

Some years back,Australia ratcheted housing interest rates to 17-18% to combat inflation. Ugly, eventually the economy hit the wall, hard. "The recession we had to have" said our Prime Minister.

Once inflation comes back to target. 2-3%, interest rates would normally reduce to "normal levels".

But this time, with the world a mess politically, economically and in terms of energy,anything could happen. I`ve not seen the world in such a mess,so it`s hard to predicate on past experience without all the current issues.[/QUOTE]

Exactly!

 

[OldDan1943]

I have a 5% loan on this boat. I have the money to pay it off via selling stock.

I am trying 'clearing the board' in prep for 'checking out'. I guessing it just wont happen.

Pay taxes on the stock sale, lose the dividend income, lose the the mortgage interest write off..... Guess I will let my estate manager worry about all that.

 

[mvweebles]

Fundamentals underlying boat market remain strong (for now).

US Labor dept just announced October's jobs' figures. Added a better than expected 261k non-farm jobs. Unemployment did move slightly higher to 3.7%, and y/y wages increased 4.7%. There are still two jobs for every unemployed person looking for work. Labor participation rate dropped slightly to 62.2%, down slightly from 62.4%, which is inline with pre-pandemic levels.

People are buying stuff and remain optimistic. PCE (Personal Consumption Expenditures - how the US Govt tracks consumerism) rose 0.6% in September for a seasonally adjusted 5.1%. Starbucks, for example, just reported stronger than expected earnings despite severe drag in China due to Covid lockdowns. USLUX, an ETF comprised of luxury brands such as Mercedes, Tesla, LVMH, Dior, etc, is however down 30% YTD.

The Tech Sector has, this week, announced several hiring pauses indicating a labor saturation point which could be a harbinger for other sectors.

Overall, while there are obviously possible storm clouds on the horizon, buyers of boats in the TF demographic appear to be in good financial condition to sustain purchases of 6-7 figure assets. In my opinion, the two biggest factors that could dampen interest is increased interest rates on home equity loans; and a change in employment and wages. The former, higher finance costs, has already happened and will depress demand as people forego purchases. The latter, increased unemployment, would accelerate supply as people shed assets and payments to make ends meet.

For those who predict dire catastrophy in the boat resale market, I would be interested in your underlying data that support the hypothesis. And why MarineMax (ticker: HZO) reported last week y/y sales increase of 16% which greatly exceeded analyst estimates.

Peter

 

[backinblue]

Good points Peter. Problem with labor is that not as many people want to work or insist on working from home. That may take a little more time to correct.

 

[Hippocampus]

Peter as regards savings rate US has and continues to lag all of the industrial world’s countries. We simply don’t save. Debt to asset ratios for US households are also the highest in the world. In short even prepandemic we lead in long term and credit card debt. Even pre pandemic percentage of folks being unable to maintain lifestyle after 65 on savings, investments and SS has resulted in folks continuing to work, be dependent upon family or descend into poverty.
The fed was in a damn if you do and damned if you don’t position. Without the low rates the economy would collapse. With the low rates inflation was the inevitable result. Same with the stimulus money. Yes, it was abused with fraud and slowly those individuals are being brought to account.
I bought my first house at 18% mortgage. Most recent for cash. For my entire employment life we put away 10% per year. That behavior is quite rare in America. I’ve lived though the gas crunch so sold the car and bought a motorcycle. At all income levels you weather the storm best you can. Anything a president does has little if any immediate economic impact. Same with congress. A latency of some years usually seen. But shifts in customer sentiment can occur much more rapidly. Releasing reserves will not effect long term trends.
This cycle will play out. Hopefully it will encourage US households to raise their savings rates to be more in line with other industrial nations. We have no mechanism nor history of addressing income inequality unlike the Northern Europeans. Hence every time the bottom falls out we utilize clumsy, inefficient, expensive interventions resulting in unintended consequences. Both parties do this. Personally would have rather seen WPA like FDR did in the 30s. The giving a fish v fishing pole argument. But that’s done. Now you can only hope the landing isn’t to hard.
Like houses nobody wants to sell a house if they can’t replace it. So number of transactions is and will continue to fall. As long as people’s sentiment is I won’t sell my boat at a great loss. I’ll wait out the cycle. So I’ll list it high. Forthose with loans I won’t sell at a underwater price. Remember inflation means your dollar is worth less. If you’re still getting raises at work or even COLAs. by waiting your paying back expensive dollars with cheap dollars. As long as you locked your rate you may be encouraged to hold off selling. That means fewer decent boats for sale so there’s some supply/demand going on.
What I expect is a fall in boat prices. Particularly at the lower end of the market due to carrying costs for waiting out the cycle. Some people just won’t be able to pay them. Little movement and fewer sales in the middle. No impact on the top end. Brokers income will decrease dramatically as fewer sales are made and value of sales decreases. New builds will fall as well except for those rich enough to take advantage of the strong US dollar.
Lived through the last cycle. Just hope fewer US boat builders end up folding this time around.

 

[mvweebles]

Good points Peter. Problem with labor is that not as many people want to work or insist on working from home. That may take a little more time to correct.

Labor participation rate has been a problem for years, hovering in the 66% level through the mid-2000's when it started a slow decline.

Remote workers plus Starlink equal opportunity in the boat and RV market. I actively monitor CruisersForum, a sail-oriented cruising site. Not many days go by that don't include a query from a newbie with a tech-centric job wondering how to do the digital nomad thing from a boat.

The last 3-years has seen many people simply quit work. Reading between the lines, they accumulated enough wealth that work became optional. This too is a buy-accelerant for boats as these people are young, healthy, and not ready to wear a divit in a La-Z-Boy recliner just yet.

I guess my point is that for the boat/trawler market, there are macro indicators that support a healthy market. That could change - if unemployment ticks-up significantly (which is the Fed's fear as well), it could really influence the supply-side as owners sell their boats. Watching the Tech sector layoffs should be concerning - could be the canary in the coalmine.

Peter

 

[backinblue]

It's not surprising as the more we pay people not to work, why would they want to?

 

[mvweebles]

It's not surprising as the more we pay people not to work, why would they want to?

A story....

30-years ago, my then-girlfriend worked for a non-profit that sponsored the Business Leaders Hall of Fame. One year, a guy by the name of Royal Little was inducted and I had the pleasure of driving him and his trophy-wife around for an afternoon (Mr. Little was 101 at the time, his Trophy Wife of many years was 74). LIttle was stone deaf and talked incessantly to avoid having to answer questions. Over the course of 3 hours, I heard his life story, much of it was corroborated by his inductee status (as founder/CEO of Occidental, he is credited with inventing the modern 'holding company' corporate structure).

So Little was born in the 19th century - he had graduated Harvard with top honors before WW1 and thus had job interviews with the most prestigious companies in the world. While interviewing at US Steel, he asked the senior executive if his children work at US Steel. "Hell no!' was his response. "Steel is a big business now. My children work with growth companies with bright prospects. If you want the same, find work in with automobiles - they are becoming our largest customer!" So Little declined the job offer and went to work for a tiny auto-related company in Ohio, the Thompson Company (Thompson is the "T" in TRW).

But back to your point, I remember him distinctly prattling on about how we make it too attractive not to work. It's a hard moral-hazard balance all western countries struggle with. But for purposes of this thread, I think it explains the difficulty in getting people to work on boats, but is less applicable to folks who can afford to buy them.

Peter

 

[Hippocampus]

Also in the WSJ a little while back it was noted US productivity per worker has been declining for quite some time. Think this is as if not more pernicious than there being. 2 to 1 jobs to applicants ratio.
There are chronic structural issues in our economy. Infrastructure, dependence on other countries for key materials, labor v capital dynamics etc. the pandemic and Putins war have just made them more apparent.

 

[Adopo]

A story....

30-years ago, my then-girlfriend worked for a non-profit that sponsored the Business Leaders Hall of Fame. One year, a guy by the name of Royal Little was inducted and I had the pleasure of driving him and his trophy-wife around for an afternoon (Mr. Little was 101 at the time, his Trophy Wife of many years was 74). LIttle was stone deaf and talked incessantly to avoid having to answer questions. Over the course of 3 hours, I heard his life story, much of it was corroborated by his inductee status (as founder/CEO of Occidental, he is credited with inventing the modern 'holding company' corporate structure).

So Little was born in the 19th century - he had graduated Harvard with top honors before WW1 and thus had job interviews with the most prestigious companies in the world. While interviewing at US Steel, he asked the senior executive if his children work at US Steel. "Hell no!' was his response. "Steel is a big business now. My children work with growth companies with bright prospects. If you want the same, find work in with automobiles - they are becoming our largest customer!" So Little declined the job offer and went to work for a tiny auto-related company in Ohio, the Thompson Company (Thompson is the "T" in TRW).

But back to your point, I remember him distinctly prattling on about how we make it too attractive not to work. It's a hard moral-hazard balance all western countries struggle with. But for purposes of this thread, I think it explains the difficulty in getting people to work on boats, but is less applicable to folks who can afford to buy them.

Peter

I don't mean to get into political conversation, but as far as I am concerned we now have what some have called Universal Income, and covid was the perfect storm to bring it about. Free to some money is another reason not to work.

 

[Hippocampus]

Peter for many years followed Sailnet, sailing anarchy and like sites. Also interacted with the sail cruising community. Initially there was a higher percentage of fully retired. Mostly folks like military, air line pilots, small business owners who sold, engineers and lawyers or doctors. Before the pandemic and conversion to remote work the population was already shifting. Multinationals were decreasing full time employees but rather shifting to independent consultants. This was most apparent in high tech, engineering and other similar fields. So many of my acquaintances could leave the boat go do a finite consulting job then return to the boat. A hiatus of some months or even a year or two became more frequent. That hiatus shorten with the shift to remote. They still not uncommonly needed to be onsite at the beginning and end of the consultancy but the rest was remote. I’ve also seen the shift in small business. Folks may turn over management to their kids or partner but retain ownership and some level of remote involvement.

 

[bowball]

A story....

30-years ago, my then-girlfriend worked for a non-profit that sponsored the Business Leaders Hall of Fame. One year, a guy by the name of Royal Little was inducted and I had the pleasure of driving him and his trophy-wife around for an afternoon (Mr. Little was 101 at the time, his Trophy Wife of many years was 74). LIttle was stone deaf and talked incessantly to avoid having to answer questions. Over the course of 3 hours, I heard his life story, much of it was corroborated by his inductee status (as founder/CEO of Occidental, he is credited with inventing the modern 'holding company' corporate structure).

So Little was born in the 19th century - he had graduated Harvard with top honors before WW1 and thus had job interviews with the most prestigious companies in the world. While interviewing at US Steel, he asked the senior executive if his children work at US Steel. "Hell no!' was his response. "Steel is a big business now. My children work with growth companies with bright prospects. If you want the same, find work in with automobiles - they are becoming our largest customer!" So Little declined the job offer and went to work for a tiny auto-related company in Ohio, the Thompson Company (Thompson is the "T" in TRW).

But back to your point, I remember him distinctly prattling on about how we make it too attractive not to work. It's a hard moral-hazard balance all western countries struggle with. But for purposes of this thread, I think it explains the difficulty in getting people to work on boats, but is less applicable to folks who can afford to buy them.

Peter

He was a character. He showed up at my b school giving a speech and handing out copies of his book.

https://www.amazon.com/How-Lose-Other-Valuable-Advice/dp/0316527866/ref=nodl_?dplnkId=231f0a0b-257b-4b3f-902a-b74518edf395

 

[Hippocampus]

Major downsides to not working. Lost of sense of self worth. Fixed income. Increase in depression and substance abuse, increase in divorce and or destruction of significant other relationships. Lack of meaningful social interactions.
Given the nature of my work was involved with many people unable to continue in the work force. Although going out on worker’s comp, or disability at first sounds great most people find it miserable or cycle downwards emotionally.

 

[backinblue]

Hippo, I agree 100% although those that choose not to work likely have many of those issue to begin with. We are just making it easier for them to choose.