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Old 05-12-2022, 07:59 AM   #1
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Boat Prices: Has the world changed????

Lot of headwinds in the boat market these days. Interest rates, fuel prices, white-hot travel sector is fading, and of course the gorilla in the room: highest inflation rate in two generations. If this CNBC article (Acorn survey data) is accurate, buying habits have already been influenced. In the last 6-months, 22% of respondants said they have delayed purchasing a car due to inflation. 77% say they are somewhat or very concerned inflation will force them to rethink their financial choices. This morning, CNBC investment wonk Jim Cramer proclaimed "The Great Resignation ended yesterday!"

Consumer sentiment has changed, but what about the boat market? Has the roaring sellers' market hit an inflection point? Is the party over?

Peter

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Old 05-12-2022, 09:28 AM   #2
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I do not have a professional view of the market. It does appear that sellers still think they can get top dollar. It also appears that boat sales have slowed dramatically. It also appears like there are extremely few nice boats available. In other words I see a lot of junk on the market that isn’t selling and when a nice boat shows up it sells quick and still for top dollar.
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Old 05-12-2022, 09:32 AM   #3
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I do not have a professional view of the market. It does appear that sellers still think they can get top dollar. It also appears that boat sales have slowed dramatically. It also appears like there are extremely few nice boats available. In other words I see a lot of junk on the market that isn’t selling and when a nice boat shows up it sells quick and still for top dollar.
Ditto.
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Old 05-12-2022, 09:53 AM   #4
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I'm no PhD in economics, but I used to think I had a general sense of how things tend to work and flow. Not anymore. In a separate thread -- on the pretty shocking escalation in fuel prices -- I mentioned how they're rolling out the 2023 Cadillac Escalade for $149,000, and doubtless terrible fuel mileage. Meanwhile I keep wondering how lower income families are paying $5 for gas, and $5 for milk (in some places). But boat and RV prices haven't declined as far as I can tell. Interest rates are climbing, but houses are still ridiculously expensive. The slips at our marina are still full, even though they're beginning to charge Palm Beach rates for a small lake on the Prairie. We just got a couple estimates for relatively minor repair jobs on the house and we got burst-out-laughing astronomical quotes, but I don't think the contractors care if we hire them or not. Then six people have decided to quit or retire at the office in the last couple months, because they don't have to work full time anymore. Maybe it's a lag, inertia, and inflation has happened so fast that the markets and consumer behavior haven't had time to catch up, or we don't see it yet. The dissonance -- the illogical contrasts everywhere -- make no sense to me.
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Old 05-12-2022, 10:09 AM   #5
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It is very weird out there I agree.

But if you're concerned about inflation, shouldn't that mean you accelerate your buying decision? Better to buy the asset now than in a year when it costs more & your cash is worth less. That feeds the asset price inflation spiral of course.

A woman I work with in the renewable energy field pointed out to me that almost nobody working today has lived experience of an inflationary cycle. We're all scrambling to figure out how to, say, provide quotes for energy projects so that developers can bid into RFPs when equipment prices are changing every month. Nobody wants to be caught out. But on the other hand, the market is booming & everyone wants to buy projects, so nobody wants to sit on the sidelines either.
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Old 05-12-2022, 10:32 AM   #6
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Funny, I think I am alive and paid huge inflationary rate increases on my first liveaboard and within 10 years my first home.

My guess there are more than a few that work or consult that were around in the 80s. Companies that depend heavily on fuel prices have seen many more cycles.
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Old 05-12-2022, 10:37 AM   #7
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My boat model was only built for a couple years before Mainship went under. One recently showed up on the market for about 30% more than I paid a few years ago and not in as good shape or with as many features as mine. So I'm cautiosuly optomistic that if I sell in a few years, I may re-coupe most/all of what I paid. Not that that was ever my plan, but a nice thing if it happens.
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Old 05-12-2022, 10:39 AM   #8
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As usual I failed to follow my own thoughts to sell the boat at the peak, sit back and wait for the drop in prices and buy a bigger one next year. Instead, the price difference remains between the one you have and the one you want.
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Old 05-12-2022, 10:43 AM   #9
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It the same with housing. If you sell at a peak you also are buying at a peak and vice versa. Timing only matters if you plan to sell but not buy. Of course most people fail at trying to time the market anyway.
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Old 05-12-2022, 10:45 AM   #10
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Funny, I think I am alive and paid huge inflationary rate increases on my first liveaboard and within 10 years my first home.

My guess there are more than a few that work or consult that were around in the 80s. Companies that depend heavily on fuel prices have seen many more cycles.
Yeah we've certainly seen energy price volatility much more recently. The tools to manage this risk are pretty well established (forward contracts, hedging, indexing). But my point was there aren't many people still working who were working through the 70's inflation spike. A few, sure.

My point is that every industry right now is struggling to figure out how to deal with everything fluctuating all at once, while demand is spiking. Most of the folks working now have never seen anything like this. I think things are going to stay weird for a while.

Maybe a good time for some of you semi-retired folks who were working through the 70's cycle to dust off the CV & rake in some consulting $$ - just remember to correct your fees for inflation
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Old 05-12-2022, 10:58 AM   #11
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I'm no PhD in economics, but I used to think I had a general sense of how things tend to work and flow. Not anymore. In a separate thread -- on the pretty shocking escalation in fuel prices -- I mentioned how they're rolling out the 2023 Cadillac Escalade for $149,000, and doubtless terrible fuel mileage. Meanwhile I keep wondering how lower income families are paying $5 for gas, and $5 for milk (in some places). But boat and RV prices haven't declined as far as I can tell. Interest rates are climbing, but houses are still ridiculously expensive....
Some people have money and can by the Escalade. Some people don't have money and will struggle to pay for the $5 gas, milk, pork chops, etc. Nothing new in this but inflation just makes it all worse.

I read more European based news sites than ones in the US. Before Putin's War, inflation was on the rise and hurting people. Putin's War accelerated and made inflation worse and I think it will get worse due to higher energy and food costs.

Since many western industrial nations are moving away from a diversity of energy sources that can provide continuous power production, to a single source, i.e., natural gas, prices for power are rising, will continue to rise, and there will be black outs. It is expected that part of New York will have black outs this summer if the temperature gets into the high 90s due to lack of power generation.

From a Wall Street Journal report:
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Midcontinent Independent System Operator, or MISO, which oversees a large regional grid spanning from Louisiana to Manitoba, Canada, coal- and gas-fired power plants supplying more than 13 gigawatts of power are expected to close by 2024 as a result of economic pressures, as well as efforts by some utilities to shift more quickly to renewables to address climate change. Meanwhile, only 8 gigawatts of replacement supplies are under development in the area.
Me thinks those states have a problem. In the UK and Ireland they are already ahead of us. Last winter, due to high energy costs, people on fixed budgets were having to decide to stay warm or have something to eat.

Apparently, energy prices to homes is capped at some level in the UK. Companies can only raise prices to that cap and no more unless the government changes the numbers. If the COST of power production rises to a point of being unprofitable, there is nothing the company can do but go out of business. The last number I saw, was that somewhere around 15-20 energy companies had gone out of business. This was due to the increase in natural gas prices. Everyone needs natural gas to produce power when renewables are not working, which was a problem months ago.

This caused an interesting food supply and cost issues in the UK. I knew that natural gas is used to product fertilizer. In the UK they have two plants that product fertilizer from natural gas AND produce CO2. CO2 is used in a variety of food production but what I did not know, was that they use CO2 to slaughter live stock. No CO2 and no chick, pork, or beef.

Because of the cost of natural gas, the two plants producing fertilizer and CO2 shut down. Eventually, the UK government stepped in to help pay for natural gas, otherwise they would have a huge food supply disaster.

The head of the Green party in Ireland is the head of the Ministry of Environment and he has proposed a ban on peat burning in September. This has caused a firestorm since at least 30% of the rural population still used peat to warm their homes. The minister wants to ban all use of solid fuel for warming houses, including wood burning, which many homes require to keep from freezing.

If you want to control many Western countries, control the supply of natural gas. This has been made possible because of the move from a diversity of continuous power production energy sources to a dependency of natural gas to provide power when renewables are not working.

Later,
Dan
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Old 05-12-2022, 10:59 AM   #12
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It the same with housing. If you sell at a peak you also are buying at a peak and vice versa. Timing only matters if you plan to sell but not buy. Of course most people fail at trying to time the market anyway.
A realtor came to the house and proudly told my wife, you told me to come back when I can get you $$$, here I am. Wife said, great, come back when you can get me $$$$. I can't win.
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Old 05-12-2022, 11:06 AM   #13
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It the same with housing. If you sell at a peak you also are buying at a peak and vice versa. Timing only matters if you plan to sell but not buy. Of course most people fail at trying to time the market anyway.
Sell the house at peak; move aboard the boat; wait for the fall on house prices. Oh, wait, you need a bigger boat to do that.
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Old 05-12-2022, 11:09 AM   #14
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My boat model was only built for a couple years before Mainship went under. One recently showed up on the market for about 30% more than I paid a few years ago and not in as good shape or with as many features as mine...
YachtWorld has two boats of my Mainship model in the listings right now. Asking price for one is double what we paid in 2015, and asking price for the other is triple. Of course take asking price for what it's worth, but both of those listings also show "sale pending." The idea that we could sell our boat for double or triple what we paid or anything even vaguely in that ballpark, over just six or seven years from purchase is just nuts. Boats are supposed to be quickly-depreciating assets -- heck, normally you don't even call them "assets," they're usually considered recreational purchases.

(I see Boat Trader has a kind of sad-looking one listed with a blown engine in Florida, $24,900. Now that's what I realistically would have expected my fully functional, well-maintained boat to fetch by now when we bought it in 2015.)
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Old 05-12-2022, 11:39 AM   #15
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Peter:

Not making fun of you for quoting him, but I will poke fun of Cramer. "This morning, CNBC investment wonk Jim Cramer proclaimed "The Great Resignation ended yesterday!"

In certain investments circles there are two guys in particular who show up on CNBC that get laughed at a lot. One is some hedge fund guy named Gartman. Gartman has an outstanding record of being wrong on every call he makes on CNBC. Yet CNBC keeps having him on. He's so bad, you will see online comments such as: "Gartman said sell. You know what to do." (IE, buy with both fists). Lately one site has been posting almost daily some old tweets from Cramer who swore the stock market had bottomed, several times, most recently in March. I just had to share because it wouldn't be funny in the Humor page here. And I admit many won't find it funny here either. It cracks me up.

But to your point about surveys and behavior. Most folks say one thing and do another. I confess I do read them too, and polls, with as much conviction as horoscopes. I take cheer from the good ones I agree with and dismiss the rest. Hey, I'm human.

Apart from boats, I do see people changing behavior. Because they have to. No choice. They can't buy everything they used to buy on the same paycheck. So they have to make tough choices, and its no surprise they don't like having to make them. Scared off by fuel prices or not, some will find the budget room they had for luxuries like boats just isn't there anymore.

This too shall pass, but it might be a while.
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Old 05-12-2022, 11:50 AM   #16
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"I'm no PhD in economics, but I used to think I had a general sense of how things tend to work and flow. Not anymore. In a separate thread -- on the pretty shocking escalation in fuel prices -- I mentioned how they're rolling out the 2023 Cadillac Escalade for $149,000, and doubtless terrible fuel mileage."


Boy things changed fast, from cheap gas and Chargers with massive engines selling well, to today. With the auto timeline to production so long, it has to be a killer job to make the wild guess what the market will be when a model hits the showroom floor.


"Then six people have decided to quit or retire at the office in the last couple months, because they don't have to work full time anymore. Maybe it's a lag, inertia, and inflation has happened so fast that the markets and consumer behavior haven't had time to catch up, or we don't see it yet."

And add another factor. Fatigue. Some people are just tired of all the nonsense they have to put up with, and its just time to hang it up, buy a boat and escape to something that feels more normal.
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Old 05-12-2022, 12:05 PM   #17
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A big chunk of the country never saw as much of a change in the last 2 years as other parts.

And even in so parts that did...there were people who didn't vchange much in their lives and others who completely changed.

I have no idea how much of the country is truly fatigued, but it's not nearly as much as the media/net would have you believe if you read closely.
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Old 05-12-2022, 12:50 PM   #18
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A big chunk of the country never saw as much of a change in the last 2 years as other parts.

And even in so parts that did...there were people who didn't vchange much in their lives and others who completely changed.

I have no idea how much of the country is truly fatigued, but it's not nearly as much as the media/net would have you believe if you read closely.
Yeah, you know that's one of those things where you can see what you see, and I can see what I see. You can accurately summarize what you see, and I can do the same. But our worlds are both limited in scope and view, so it would be no shock that neither one is representative. Still, we see what we see and its real to us.

My family, my friends, my barber, and the people who stop me on the street or in the grocery store to chat are pretty tired. On the other hand, if all of us were waking up each morning and taking our first cup of coffee in the cockpit and looking out over God's great wonders I have to think we'd have a different view of the world. At least I hope so, because that's what I'm busting my hump to work toward.
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Old 05-12-2022, 12:53 PM   #19
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A big chunk of the country never saw as much of a change in the last 2 years as other parts.

And even in so parts that did...there were people who didn't vchange much in their lives and others who completely changed.

I have no idea how much of the country is truly fatigued, but it's not nearly as much as the media/net would have you believe if you read closely.
I'd hazard a guess that people who own boats in this class (or aspiring owners) have investment portfolios. YTD, DJIA is down 14%; S&P down 19%; NAS 29%; and R2K 24%. Further, I'd guess many (most?) of buyers are within line-of-site of retirement heightening the concern. If they seek financing, a home equity loan is likely the least expensive route yet still, on a $250k loan, payment would be about $300/mo higher this year than last year due to increased interest rates. And that's best case (Home Equity Loan). Finally, the Covid-induced flight to outdoor activities is in the rear-view mirror.

I don't have a dog here - I'm not a buyer, not a seller. Just a guy who has the same boat I've had for 23-years that burns 1gph because that's the speed I like to go. Whether that costs $3/hr or $6/hr just won't make a difference in my world.

Peter
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Old 05-12-2022, 01:23 PM   #20
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I'd hazard a guess that people who own boats in this class (or aspiring owners) have investment portfolios. YTD, DJIA is down 14%; S&P down 19%; NAS 29%; and R2K 24%. Further, I'd guess many (most?) of buyers are within line-of-site of retirement heightening the concern. If they seek financing, a home equity loan is likely the least expensive route yet still, on a $250k loan, payment would be about $300/mo higher this year than last year due to increased interest rates. And that's best case (Home Equity Loan)....
I know of a house for sale where both the seller and buyer are between a rock and a hard place.

Recent inspections have found some surprises that will be expensive in time and money to fix. The seller needs out of the house ASAP due to debt on the home equity line, as well as other issues, and has no funds available to make fixes. Thus the price of the house will have to drop to cover said fixes.

The buyer needs to get into the house ASAP because they have a low interest rate that will expire if they do not close on the house. Given the problems that were found, normally one would delay the closing, but if they do so, they loose the lower mortgage rate. They are stuck with taking on risks with the found problems vs the reality of paying far more each month due to the higher mortgage rate if the sale does not close. Furthermore, house prices are likely to have risen, so with higher house prices and higher mortgage rates, they will have to buy less house. So the buyer is going to take on risks with the known problems because the reality will be higher mortgage payments on a house that is not as good.

Rising inflation and housing prices makes for strange situations.

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