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

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.

tiltrider1 said:

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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Ditto.

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.

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.

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.

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.

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.

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.

psneeld said:

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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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

kthoennes said:

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....

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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:

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.

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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

backinblue said:

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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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.

backinblue said:

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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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.

backinblue said:

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...

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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.)

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.

"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.

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.

psneeld said:

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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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.

psneeld said:

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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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

mvweebles said:

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)....

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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.

Later,
Dan

FWT said:

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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True.... I wasnt out west, but in tbe last 2 years I have travelled by RV from Florida to Maine to Texas multiple times, multiple months per trip. Talked to friends, family, businesses and total strangers.

Not what I would call limited and certainly over a varied set of COVID infection rates.

Both family and friends were infected and none seem to be "tired"...all taking their normal vacations, visits, recreation....etc.

Guess it depends on how people react to things....glad my world didnt seem as dismal as many would have me think it is.

Here’s my basic and probably naive thoughts:

We are in all probability heading into a recession created by increasing interest rates.

With wealth loss from stock portfolios combined with increasing costs from inflation, I would suspect that boat sales will decline.

New boats will cost more. If someone finances, interest rates will make it cost more. Fuel costs continue to increase.

So demand for new boats decline. Used boat prices get supported by higher new boat prices but still will be under pressure as fewer can afford the discretionary luxury expenses of boating.

I helped sell a friends boat for 100k more then they paid for It a year ago with minimal changes, less then half as many companies are building boats as there were 40 years ago yet Twice as many people/ families want to go cruising, boat prices will most likely continue to go up. Side note, The government has printed 80% of the currency in circulation in the last 3 years,,, yet they say the gdp is up???

psneeld said:

True.... I wasnt out west, but in tbe last 2 years I have travelled by RV from Florida to Maine to Texas multiple times, multiple months per trip. Talked to friends, family, businesses and total strangers.

Not what I would call limited and certainly over a varied set of COVID infection rates.

Both family and friends were infected and none seem to be "tired"...all taking their normal vacations, visits, recreation....etc.

Guess it depends on how people react to things....glad my world didnt seem as dismal as many would have me think it is.

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Wow. You have cast your net more broadly than me. I tip my hat to that.

I will just throw out a fact. Not opinion. Fact. Bank industry deposits have soared. It began with covid in 2020 but continues today. When people get scared they hoard cash. Covid got them scared, but that's past. But that cash hoard is still high.

Second weird fact. Bank deposits are huge. So huge that someone I know had Bank of America refuse to take for deposit a check from a real estate settlement, telling them they had max deposit limit of $85,000 per month. They switched banks.

Third weird fact. Credit card debt is soaring.

The facts suggest some are hoarding cash. Others can't make ends meet without tapping credit.

bowball said:

Here’s my basic and probably naive thoughts:

We are in all probability heading into a recession created by increasing interest rates.

With wealth loss from stock portfolios combined with increasing costs from inflation, I would suspect that boat sales will decline.

New boats will cost more. If someone finances, interest rates will make it cost more. Fuel costs continue to increase.

So demand for new boats decline. Used boat prices get supported by higher new boat prices but still will be under pressure as fewer can afford the discretionary luxury expenses of boating.

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Not naive. Not at all. Its never different this time. What is different every time is the details and circumstances. Last time it was real estate at the root. It would be a first if it were real estate again this time, at the root. (Not trying to say it won't be impacted)

Its a very old story. Things get overheated. Fed hikes rates. They keep hiking until things break. Then they break. Then they cut rates until things stabilize and begin to heat up again. Its that simple. It only gets more complicated when you begin to look at what got overheated, what broke badly and why, and so forth. Which is useful to try to gauge where things are in the cycle and whether the turn at the top and bottom are near at hand.

And yeah, anyone with investments is down. Anyone. Everyone. Obviously stocks. But if one were in bonds, down probably worse (in terms of market value). Down enough to halt boating plans? Way too personal a decision, person by person, and way too hard to generalize, at least for me.

Because, here's a weird bit of history.

The ocean resort town in MD is Ocean City. Coming into 2000 there had not been a new condo built there in probably 20 years. The stock market had boomed, but not OC real estate. AFTER the market crashed, real estate just flat exploded upward. Values soared. New condo went up right and left. The realtors explained it: the typical buyers were in a time of life where the last kid tuition bill had been paid, and they got liquid selling stocks and employee stock options. Mom and Dad looked at each other and said, its now OUR TURN to ENJOY LIFE. It was a demographics thing, and a trend that defied stock market direction.

Go figure. Too hard to predict what a herd of people will do.

FWT said:

Wow. You have cast your net more broadly than me. I tip my hat to that.

I will just throw out a fact. Not opinion. Fact. Bank industry deposits have soared. It began with covid in 2020 but continues today. When people get scared they hoard cash. Covid got them scared, but that's past. But that cash hoard is still high.

Second weird fact. Bank deposits are huge. So huge that someone I know had Bank of America refuse to take for deposit a check from a real estate settlement, telling them they had max deposit limit of $85,000 per month. They switched banks.

Third weird fact. Credit card debt is soaring.

The facts suggest some are hoarding cash. Others can't make ends meet without tapping credit.

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Not sure what you mean by casting a net.... I am a traveller by nature and between careers and personal motives....have always looked over the horizon. I also always try to limit my "stances" to be based on actual experience of things much more than in a haphazard or casual manner.

Similar to the downer post...I don't find any of that weird but to be expected with what is going on...

Well, the $85,000 bank limit is sorta weird....but a lot of banking laws started getting weird in the 1990's in my experience.

Most things in life become explainable when a few key facts/issues surface. Sit back and watch the Monday morning quarterbacks emerge as each phase of these "new" but really previously experienced happenings fade into the past.

My observation is that most people are still living in denial. Like TV ratings, they may say one thing on a survey, but their real actions are otherwise. It's not average individuals selling their stocks, but huge institutional investors. Home selling, boat selling, may be down slightly but still well above 2019 levels. Prices definitely haven't dropped. I do believe the longer the denial, the harder it is ultimately going to hit. I just don't know when or how. Today people are still buying at record levels.

Times have changed.

My kids AND my older sister have said screw it.... we are spending right up to what we can. Savings and retirement accounts are afterthoughts.

Sounds a lot like what I have been reading. I guess with all the programs to wipe out debt eliminates a lot of fear in way more people than I think it should.

Me, survival schools taught me a lot. I am a saver and frugal, but could care less about the current turmoil as surviving is thiving on it, not letting it beat you.

FWT said:

Go figure. Too hard to predict what a herd of people will do.

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Sometimes its hard, but not always. Sure, experts got it wrong at the beginning of the Pandemic, but within a month or so, trends were figured out and we were off and running for close to 2-years.

But you can't defy the laws of supply/demand forever. In the opening post, I described a half dozen headwinds that threaten financial friction to stiffle demand. Supply side will take some time as sellers tend to be slow in accepting this type of change.

Maybe there are a few brokers reading this thread who might chime-in? Any changes in buyer interest? Does YW track search activity in the background? Some sort of Days-on-Market data?

Peter

psneeld said:

Sounds a lot like what I have been reading. I guess with all the programs to wipe out debt eliminates a lot of fear in way more people than I think it should.

.

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Joke of the day: "My home mortgage self-identifies as student debt."