Used Boat Regional Markets

[Pete]

First, this may be on the border of Tech Talk, but it seemed like the best fit given the available categories. The subject is, what is happening in the used boat market. I think we all know why the market is soft, annual slip availability and rates, transient slip rates, fuel costs, insurance rates, yard costs, etc. It is not my intent to discuss why, but to address the resulting market condition.

I live and do the majority of my boating in the mid atlantic east coast. I am located about 10 miles south of the Hatteras plant, on the Neuse River in eastern North Carolina. Our boats stay in the water year round, with the annual hauling for winter starting maybe 150 miles north of us. There has been far less boating activity in this area recently. $3.00 a gallon fuel seems to be the breaking point for usage. Resale of boats is almost non existant, and the larger the boat the worst the problem. In casual discussions with people interested in larger boats the bottom line seems to be " I can afford to buy one, I just can not afford to own it." I would estimate that the actual selling prices in this area are about 60% of what they were 5 years ago. My insurance company lower the insured value of our boat over 20%. It is difficult to debate this with them given current conditions.

BTW, Hatteras appears to be still cranking them out for the "money is no object crowd".

What are other areas seeing at this time? Thanks

Pete

 

[NAN-PO 41]

One of the members of our yacht club passed away last spring and I understand his 43' Hatt M/Y sold at the end of the Summer for about 60% of the original asking price. This boat wasn't a "10" but wasn't a dog either with recent rebuilds on 3208 cats and it was stabilized. This was in the Boston area.
Fred

 

[krush]

See Also: housing market.

 

[Passages]

There are a number of similar threads related to the marine market, however this topic is in a constant state of flux so I suspect the readers will not tire of it.

Brokers will tell you sales are great, but past performance is no indication of future trends.

Here in the Northeast, sales are off and prices seem to be depressed.

I don't think fuel prices alone are hurting the maket that much as fuel is the least of the ownership expenses.

Insurance seems to be a much more significant issue in the SE or Gulf States. Here, we are seeing more reasonable increases in premiums.

Future economic uncertainity and tightning of credit are the biggest bad news drivers from what I've seen. When I sold Passages in June, I forfeited an attractive 5% loan. Today, it would be around 7%. Our future economy in general is another big question. We are overdue for a recession and the prospect of military action in the Middle East (whether US lead or not) likely will push oil well over the $100/barrel mark. Forget for a moment the $4-5/g for diesel you'll pay, Think of the global inflationary impact it would have.

Consider also the large number of folks who over leveraged themselves during the real estate bubble and cheap credit days of 2002-2003. Over extended folks are in a real bind because they're upside down and while they can afford the payments, they don't have the money to pay difference between the balanced owed and the market value. They can't move up to a better boat because they can't sell what they have.


I'm watching how this all unfolds very carefully. I'm probably the ideal big boat buyer. Good income, good credit, sold my 42' for a good price, wanting to move up but VERY hesitant for the reasons noted above. I've decided not to buy until Q1 2008 at the earliest. Even then if things don't feel right I may foego buying and investigate fractional ownership or chartering.

Bottom line - I'm a buyer and I'm not buying.

 

[SeaEric]

Here's my answer from this same question posed back in August 2007. My answer is still the same.


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Allow me for as moment to relate all of this back to the question asked by this thread. I have now been selling boats for 18 years. That means I have been here through Republicans, Democrats, Luxury Tax, Fuel Crisis, High interest rates, 911, and a few other major and minor disasters economically and politically.

BOTTOM LINE: The majority of the folks who buy boats (from me anyway) are hard working people (many blue collar) who are at a point in their lives where their home is paid for, their kids are raised educated and gone, and it's now their time to enjoy life. These are not what you would call wealthy folks, but they have money in the bank and great credit. Probably half of my customers do not need a boat loan. The next 45% have excellent credit, money in the bank and are approved for a boat loan easily and promptly. These folks buy and sell and do what they want while ignoring the media whipped crisis of the day. Only about 5% who want to buy cannot due to inability to close the deal. This is my experience here on the Chesapeake, Kent Island Maryland. I'm sure in the "High Roller" areas like So Florida or the Left Coast, things are different. I agree with Karl in that there are probably a lot of loans out there, mainly on overheated real estate, that should have never been made.

I think that predictions for the end of the world are premature. For the large percentage of us out here who plan ahead, save a few bucks and handle credit responsibly- everything is going to be just fine.

I do agree that there will continue to be some nice buys on yachts, and perhaps on some foreclosed real estate.

 

[Pete]

I too remember the discussion on "how" we got to the current conditions a while back. That is why in my first paragraph, I tried to limit the discussion to "what" the condition of the market is today. I agree, the history need not be rewritten. What interest me now is sales volume, days to sell, selling versus asking price, differences based on boat brands and size, etc; now and 3 or 4 years ago. I hope other will also find this type of info interesting.

Pete

 

[Westfield 11]

Even then if things don't feel right I may foego buying and investigate fractional ownership or chartering.

Bottom line - I'm a buyer and I'm not buying.

I can afford to buy and operate, but am waiting for prices to collapse completely before I move in. Mean while we will continue to charter, they aren't Hatteras' but in the PNW there are some very nice Yachts available. We plan to spend 3 weeks next summer running a 60' De Fever up in Desolation and the Broughtons with some friends. Check out Anacortes Yacht Charters @ AYC.com, we have been very satisfied with every aspect of their operations. This is bareboat charter. Too bad they aren't in other cruising grounds too.

BTW these are not Moorings style clorox bottles like the sailors have to put up with, but real cruisers, fully equipped with high quality mechanicals and including a complete operators manual for the specific boat and ALL its systems. Our last charter was a Monk designed Ocean Alexander 50 MK 1: twin diesels, radar, GPS, ThermoPure waste system with Vacuflush heads, Webasto heater, etc.

On a side note, there are a couple of canaries in the coalmine that I check to get a feel for the market. Once they get below $100k I might be tempted to buy, one is a triple cabin up in Tenn. and another is a 58' YF in San Diego both are asking $139k. I am not interested in those vessels in particular, just monitoring the bottom of the market through them. I realise that I may hurt some feelings as the boat in Tenn is well known here, but business is business and I have an obligation to my family not to pay 1 penny more than necessary.

 

[krush]

Is chartering basically renting a boat? Does it come with a captain or crew?

What are the prices for that?

 

[Westfield 11]

Bareboat charters are w/o capt or crew. Check AYC for rates and fleet info. It ain't cheap until you compare it to ownership......Best part is handing in the keys and driving away with no expenses or worries until the next year.

 

[Genesis]

Yep.

I want another (larger) Hatt, probably a 58YF but maybe an LRC, but I'm not buying until the market collapses - and I'm quite sure it will.

When (not if) it does, I will buy, or if I was to find a truly OUTSTANDING deal I'd pull the trigger earlier on.

I'm absolutely certain we are looking at a credit contraction the likes of which we have not seen in 30 years. I remember well what happened to boat builders in the 70s and early 80s, and also remember what the used market looked like.

It's going to be worse than that this time around, because the leverage is higher.

Its not so much about whether or not someone can afford it (I can); it is about whether they believe it makes sense to spend the money on a depreciating asset now with the prospect of the government hyperinflating the money supply in a failed attempt to prevent the housing market from going back to the mean in affordability. Whether you have money or not isn't the relavent issue - overpaying is overpaying, and most folks who have cashola didn't get where they are in their life by throwing it away.

 

[SKYCHENEY]

We are really getting hit hard here in Michigan. Our taxes keep going up and our population is declining due to the lack of jobs. But, even with this bad economy, our marina is closer to full than it ever has been. Plus, more and more of the slip owners are buying older used boats (mostly Hatteras). I think the used boat market has finally gotten low enough that some just can't seem to pass up the opportunity to pick up a good quality used boat at a great price.

This is really strange to me as we all seem to be feeling the economic pain around here, yet some boats are selling.

I will admit, however, that during my trip to northern MI during the summer, it was surprisingly easy to get dockage at many of the usual hot spots that should have been full. So, maybe they own or buy the boat, but they don't seem to be going anywhere with them.

 

[Passages]

I'm not buying until the market collapses.

Karl,
You're going to tell us when that happens, right?

On a more serious note - what needs to happen to turn this around?

Peace in the Middle East? Good luck.
Moderation in commodity prices? - Not with China & India on their buying spree.
A US balanced budget and reduction in deficeit spending? Not happening.
Print more money? Dollar depreciation and inflation.

I just don't see the economy getting better in the forseeable future.
----------------------------------------------------------

And back to the original posters question on regional markets. It's slow in the Northeast. According to YW, Texas for some reason seems to price boats about 10% less than the country average. The Great Lakes has some very good deals going on as owners want to sell before they have to pay for winter storage. I wanted to call on a 1986 46' POST in the GL's that dropped it's price from $200k to $124. It had a sale pending note on it a week later. (The day I was going to call the broker)

 

[mstailey]

To further Sky's comment,

Yes my marina seems to be full as well. However the guys at the fuel dock are screaming they are going broke and I've noticed the lack of traffic out on the lake. Recently there was an in water boat show here is S.E. Michigan (metro beach) and in talking with the brokers I know they stated their sales were hot, hot, hot.

As with anything one needs to learn how to ask the "right" question when dealing with sales professionals.

Turns out they are selling their fair share. However with the Canadian dollar neck-and-neck with the US dollar and the depresed boat prices here in MI (my guess is about 18-21% off from 2 years ago) well - guess where their sales are coming from?

My unofficial survey pretty muchs concludes the basic statements here for S.E. Michigan. Can afford to buy them can't afford to run them.

 

[Genesis]

Karl,
You're going to tell us when that happens, right?

On a more serious note - what needs to happen to turn this around?

Peace in the Middle East? Good luck.
Moderation in commodity prices? - Not with China & India on their buying spree.
A US balanced budget and reduction in deficeit spending? Not happening.
Print more money? Dollar depreciation and inflation.

I just don't see the economy getting better in the forseeable future.

House prices need to come down by 30% on average. More (half+) in California and Florida.

Until it happens, the problem won't be fixed. The debt has to be unwound and the people who wrote those notes need to eat them. The longer this is put off, the worse it gets, and if we try to hyperinflate out of it oil will double in price from here and fuel will be $5+/gallon.

So much for powerboats if THAT happens.

This is not going to be pretty. Not at all.

And back to the original posters question on regional markets. It's slow in the Northeast. According to YW, Texas for some reason seems to price boats about 10% less than the country average. The Great Lakes has some very good deals going on as owners want to sell before they have to pay for winter storage. I wanted to call on a 1986 46' POST in the GL's that dropped it's price from $200k to $124. It had a sale pending note on it a week later. (The day I was going to call the broker)

There are some "good deals" but the deals will be better in a year or two. By far. The simple reality is that a lot of people are trapped right now between falling values, their perceived "loss" if they sell, and operating and carrying costs. Traffic on the water around here is down 50% or more from two years ago, and this summer I could walk into restaurants that last year had an hour wait and be seated immediately.

All this talk about "no inflation" is nonsense. Sure, there's no inflation - if you don't eat or use energy!

Wait until the heating bills come this winter. Oh my God. Especially if you use heating oil. 30% increases y/o/y are likely.

Sure, the wealthy will be ok. But the guy with "decent means" but not rich is going to be in real trouble. Our middle class is the one who's going to bear the brunt of this.

We never should have permitted this speculative bubble and the root of it is found in the lack of regulation. All the off-balance-sheet games (conduits, SIVs, etc) are a huge part of how the pollution got as bad as it did.

This WILL unwind. We are now arguing about when.

As for me, I've got my little boat and will buy my next big one once this unwinds. It won't be for a couple of years, perhaps longer - and if Ben Dover tries to "save it" (as he's already attempted - have a look at the Dollar since his "rate cut", then look at the 10 year bond - that's real interest rates) we'll get that $5/gallon fuel and I'll be looking for a new boat all right.

A SAIL boat. (You think I'm burning up 200 gallons of fuel for a day out at $5 each? I don't think so!)

 

[Dave Phipps]

From Lake Michigan and Milwaukee:

New boats have sold some impressive numbers around here this summer. The Racine in water show had record sales....lots of new Sea Rays, Tiaras, etc....mostly to people who don't have an existing boat. One dealer reported over 30 new boats sold at the show.....it doesn't get much better for those guys.

As for fuel costs; boaters are taking fewer longer trips at vacation time, so there are fewer transients, and there is no problem getting transient slips around the lake this year.

Used boats.....a completely different story; fewer sales. There are some, but clearly not as many as last year.

I think that new boats are selling to folks with well above average incomes and who's business interests remain relatively unaffected by the current economic turmoil. The average HOF member, who makes a decent living and who choses to spend his discretionary income on boating is pinched....there are no buyers for his existing boat, and he can't move up. He will buy again....even if his new boat sits in the slip more due to rising fuel costs. It just means shorter trips, and I don't hear anyone talking about getting out of boating.

If you look at the interest level on our own HOF for sale site, there is a lot of interest at the smaller, less expensive offerings; but as you get into the larger boats and over 200K, there is markedly less interest. I think that's because the individual who can afford the 200K and over boat may also be able to afford a new boat, so there's a gap in interest in larger, used boats.

There are of course, the buyers for whom the principal objective is to get the absolute lowest price ever recorded; for these folks to do anything else is unthinkable. The current market gives these buyers reason to hope and wait; it's like the vultures circling overhead, and they will probably get their day. I still think that if you find a boat that you really like, that's been well cared for and is offered at a reasonable value, waiting several months for the market to bottom may be too late...the boat may be gone, and you may have to search for a while before finding another suitable candidate. Many of our members have searched for two years in good markets to find just the right boat. In a stressed market, sellers who face selling at poor prices are not as likely to put the necessary maintenance into the vessel...thinking that it's a losing proposition anyway. In addition, some lenders may be scared out of lending against boats if they see the bottom falling out of the market, so you may have trouble getting that loan once you find your prize.

There will be a segment of the sellers; guys who love their boat and were hoping to move up, who will have to rethink the idea of selling in that market...and if they can afford to keep the boat, they may do just that.

I'm not suggesting anyone pay way more than they should have to, but I am saying that if you are in the market and come across a good boat, I'd be ready to buy if there's a reasonable deal to be made.

 

[SKYCHENEY]

Dave,
I understand your boat is still for sale and that it is a real gem. A guy from our marina looked at it a couple of months ago before deciding that he really wanted an ED. As luck would have it, he found that 53ED in Tennesee and is currently on the voyage home. I talked to him yesterday and he was in the Illinois River. I hope to see his new beauty sitting next to mine this weekend.

I wish you the best in your eventual sale. I'm sure you will be sad to see her go as she sounds like a wonderful 53MY.

 

[krush]

I'm waiting, and looking. I just up my dreams to a bigger boat.

I've been watching both the prices of boats and airplanes just keep dropping and dropping. It's amazing how many planes are for sale in the $40k range. A year ago, these planes were 60-80k.

Let the fuel prices keep going up, cheaper trucks and toys for me. I'll just convert to diesel electric lol.

 

[Dave Phipps]

Sky,

Thanks for you comments. Jeff was a real gentleman, and I'm glad he found the boat that's best for him. He will be a real credit as an owner, and I'm sure we'll hear more from him here when he gets back. I told him I can't wait to see pictures!

You should also know I thoroughly enjoyed your pictures from your cruise this season. If you get over to this side of the lake please look us up.

Hopefully someone who knows Hatteras boats and who has looked at several will find my boat to be their perfect next boat!

Dave

 

[Maynard Rupp]

In the Detroit area we have lots of boats that never went in the water this year. they are still shrink wrapped from last year. I went through our largest marina,"Jefferson Beach Marina", two weeks ago. I figured that any boat that was going to be launched this year would surely be in the water by Labor Day. I also figured that no one had pulled their boat for winter storage yet. I would estimate that 1/3 of the larger slips were vacant. You can tell the difference between not rented and a boater that is out cruising as the slip has no mooring lines, water hoses, or power cords. there also were about 25 boats still in storage from last winter. My sales friends tell me that they are doing OK though. This area is more depressed than any other I have heard of. It is also about the most depressing area to live that I know of. The great boating that is available here makes up for those other problems. Yes, like all of you have said, there are not many folks on the water this year.

 

[MarioG]

I can say that we bought our YF and the best time and at the worst time. Thankfully we were able to buy this boat simply because the market timing was right. sadly our boat would have probably sold for $100k more just 3 or 4 years ago. I'm sure that the former owner realized that the market was soft and probably was going to get worse hence my good timing. I would not have been able to buy this boat just a few years ago. The only crises I'm facing now is the grotesquely high insurance premiums. I now pay just shy of $8000 a year on $224K coverage. I am under insured for the boat value/ purchase price.

My insurance broker says that there will be more affordable insurance in the future as more underwriters come back to the Florida market. IF the trend continues to stay hurricane free. will see.

Personally, I am more pessimistic about insurance coverage. as a matter of a fact, I only found one underwriter willing to write a policy for us. My broker said that the reason why we got coverage for our boat is simply because of our squeaky clean survey.

I have no idea what the future is in store for us if we loose coverage and not able to find new coverage. which brings up a interesting question of what will the bank do since it is a requirement to have the loan insured. catch 22?