Boat supply drying up. Higher prices ahead?

[JV II]

I think we weathered a huge storm.

This is not scientific, but I have made some observations about the reduced supply of new and used boats:

1. A number of boat brands are out of business in the last 2 years
2. Dealer inventories are down significantly
3. The boat show inventory is half of what it was in recent years
4. The tragic loss of boats this year from roof collapses takes two boats off the market for each totalled boat
5. The Florida hurricanes over the last several years wiped out a bunch of used inventory

I'm sure there are other indicators that I have missed.

I looked for a local comp for my 330DA. Russo had one left, but they have an offer on it. Bassett doesn't have any. Hyannis has one. Last spring, there were 8 to chose from.

Russo used to have multiples of all mid size cruisers. Now there is one of each. They don't have a 2010 330/2009 310 in inventory. They sold their last '09 38DA and don't have a new replacement 390DA in inventory.

There is simply very little selection on the dealer lots.

Scanning the brokerage inventory of the 3 dealers mentioned did not produce any decent late model mid size cruisers. At least, not like a year or 2 ago when the average Sea Ray owner traded up in 2-3 years (I bet that stat will change).

So, it would seem that the storm has passed. Things should stabilize this year. A reduced supply is going to drive prices up. It will start with the new boats and used boats will follow.

 

[Dave S]

The supply of new boats is diminishing and inventories will be low for some time to come because the factories are just ramping back up on certain models and dealers can't afford to stock a lot of new boats like they did in the past.

But there will continue to be a glut of certain models of used boats on the market for the next few years in my opinion. More people will default on loans or decide they have to get out as well adding to this inventory So in my opinion it will remain a buyers market on used boats for some time to come.

Dave

 

[tobnpr]

Dunno about that.

There's still a huge supply of used boats at ridiculously low prices.

I suspect that just like the housing market, where foreclosed homes and distress sales are still driving the market downwards, and the construction of new homes has all but ceased- the boat market will operate in a similar fashion.

How can a new home compete with a two-five year old foreclosure or short sale?

As the inventory of distress sale boats reduces (if it does) and those prices rise due to reduced supply, then I would expect the new boat market to recover. Right now, there is such a huge price disparity between "nearly new" and "new" boats I can't see why anyone would buy new.

 

[gerryb]

My observation (first hand as well as from the boat show this year) is that the golden era of boating (supported by liberal financing!) is over. Prices may eventually stop falling as supply matches demand - but the days of waiting lists for all marina slips in NJ I think are gone. The 4 near me all have available slips and some have dropped prices. In '05 - waiting lists across the board!

 

[Ka1oxd]

From what I heard from sources, the days of building boats just to have stock are gone. They want to move back to the days of building boats to order. This reduces inventory, and ensures few left overs.

 

[randerson]

Glad I'm in the boat owning business rather than the boat building or boat selling business.

Most if not all of the "luxury" spend industries are hurting . . . lake shore or beach homes, country club memberships and boats. I could join a country club near me tomorrow without a down stroke, 2 years ago it was $15,000 with a several year waiting list.

Times are gonna have to get a LOT better!

 

[Carver370]

A very good source tells me that the local Sea Ray dealer here will only be ordering boats when A customer wants one built, selling a 50+ footer out of a catalog? The idea is good however if you put 2 same model and year boats together one is different than the other, you dont know if you will end up with a good one or the mediocre one?

In 2005 I had money down on a 2005 500 Sedan, looked at another boat just like it at another dealer and the boat had significantly different fit and finish. Remember this is new for new.

As far as boat supply drying up? I don't think so any time soon, buyers will look outside their area quite a bit for the boat they want so looking at your 3 local dealers is not a very good indicator. A quick search on yachtworld reveals 16 2008-2010 330 Sundancers on the market. Thats a lot.

 

[JV II]

So, everyone agrees on the following:
the builders are not pumping out boats like they used to
dealers are not keeping inventory
orders are being taken for new boats rather than buying off the lot
no left over model year boats in inventory

Being a "new boat buyer," that make me shudder a little. It means to me that I have much less leverage in a purchase. It means that I probably will not ever get the same deal as a percentage off the MSRP again. With MSRP up $80,000 on my existing boat from 2008 to 2010, the next guy is going to certainly pay more OR start competing for those late model used boats. So, you have a situation with new model sales prices going up and more competition on the used boat market. That is a recipe for price turn around.

A quick search on yachtworld reveals 16 2008-2010 330 Sundancers on the market. Thats a lot.

That includes new dealer inventory (one was the '08 my dealer had in stock). Are 16 '08-'10 330s enough for the world's demand? That's about one for every 3 states. Again, I'm glad I'm not competing for one. Maybe for today, but what about in 6 months or a year from now?

 

[tobnpr]

The problem, is that no one really knows what they're selling for...new or used, unless someone volunteers the information. Many people don't like disclosing that information.

Brokers have access to "sold prices" from Yachtworld, but that's useless information as well. It's what the selling broker reports- certainly no one is expecting the broker to report the real selling price... the more he inflates the number, the better he looks to prospective clients.

In my opinion, MSRP with SR and many other builders is a meaningless number these days. If you can pick up a boat for 50% off MSRP you're thinking you just negotiated the deal of the century. Maybe, Maybe not. More likely than not, you ended up paying exactly what SR expected to get for the boat.

 

[JV II]

In my opinion, MSRP with SR and many other builders is a meaningless number these days. If you can pick up a boat for 50% off MSRP you're thinking you just negotiated the deal of the century. Maybe, Maybe not. More likely than not, you ended up paying exactly what SR expected to get for the boat.

Agreed, but I don't think anyone here can say they bought their boat new for 50% off MSRP. I've heard 30-40% as the running number. Anyway, let's use the 330DA as an example. I priced mine out on the SR website to be $380,000. Last year it was $330,000 with the same options. So, if I got it at 50% of MSRP, I would still have to come up with an extra $25,000 today for the same boat.

Its always better to expect the worst. Using the worst case, I should be able to buy myself an '08 330 for $82,500. This assumes the buyer got a smoking deal of 50% off the MSRP of $330,000 and then lost half his value after 2.5 years. I just don't see that happening. Even if the buyer got 30% off the MSRP and then lost half its value in 2.5 years, the used sale price would have to be $115,000. Good luck getting one for $180,000 in today's used boat market with only 16 from coast to coast with a price range of $180,000 to $230,000.

 

[trit21]

Good luck getting one for $180,000 in today's used boat market with only 16 from coast to coast with a price range of $180,000 to $230,000.

You say good luck getting a 330 for $180,000 like it is not going to happen, it that true. Currently there are 7 boats LISTED under $180,000 and I bet if I put my offer in at $165,000-$175,000 I would have a contract to buy one.

Not sure what your point is with the thread. Boat pricing is not increasing but is still in decline. Your argument that prices should rise since no dealers are stocking boats which means the used market is going to be taxed doesn't hold water since there are no buyers for boats right now. When buyers come back to the market, boat builders will do the same they did in the past, build boats. Remember, history repeats itself and lessons are learned but, when the almighty dollar is waved in front of the faces of boat builders, they will build and start stocking again.

 

[Carver370]

Brokers have access to "sold prices" from Yachtworld, but that's useless information as well. It's what the selling broker reports- certainly no one is expecting the broker to report the real selling price... the more he inflates the number, the better he looks to prospective clients.

I work with Yachtworld on a daily basis. There is no reason to inflate the sold number since there is no way for prospective clients to ever see that number unless the broker is looking at numbers to list a current boat at or showing a client similar boats to what he has listed. Trust me when I say there is no reason a broker would want the customer to look at an inflated number when they are listing their current boat. Why you ask? Because the higher the price, the longer it will take to sell and if its not realistic its simply a waste of time to list the boat. Also juding by what I am seeing on Soldboats as far as what is currently being sold, its a blood bath. If they are inflating these numbers the boats must have been given away! lol

Also, Yachtworld can perform a listing audit at any time to any broker at random and they ask to see actual documentation of what the boats actually sold for. Any discrepency and they are no longer allowed to use Yachtworld. I have seen this done 2 times that I know of. When a boat is pegged sold, the broker MUST put in a sold number or it cannot be marked sold. Some companies just delete the listing to avoid this.

 

[JV II]

Currently there are 7 boats LISTED under $180,000 and I bet if I put my offer in at $165,000-$175,000 I would have a contract to buy one.

There are a couple of 310s included in that mix and a few multiple listings of the same boat that look like teaser listings.

Not sure what your point is with the thread.

Just thinking out loud. Speculating. I want to revisit this thread when things turn around. Now, don't go investing your money in boats.

 

[Dave S]

Read this article.

http://www.tradeonlytoday.com/compo...2194-repo-boats-continue-to-clog-the-pipeline

 

[Mr Salt]

Back in 1986 when the tax law changed how you could treat passive losses on second or rental homes, the market for condos crashed. Construction stopped, cranes stood idle. Prices fell like there was no bottom. Once the built inventory worked its way through the system, prices came back up--but it took years for that to happen. The same thing will happen with boats. Production is reduced and likely below the level of boats coming out of the market, by storms, roof collapses, etc. Once supply and demand get back into balance prices will once again rise as they did in the second home market. I doubt that it will happen this year but it will likely occur in the next year or two. That will be a good thing for the used boat market because there will be too few new boats out there. Hopefully the credit markets will become realistic as to what people can pay and not grant loans to people who can not pay for them. Employment will have to improve for there to be a recovery in the boat market. Boats are marginal dollwrs and I am not so sure as to how many of them are around these days.

 

[JV II]

Read this article.

http://www.tradeonlytoday.com/compo...2194-repo-boats-continue-to-clog-the-pipeline

Redistribution of the existing supply is not new supply. The article tells about boat dealers going out of business and shipping their inventory to more successful dealers. So the supply part of the new boat equation has not increased, it has decreased. The demand part of the equation has certainly decreased. The bigger question is, which way has this formula tipped in the last 6 months to a year? Are we at a point yet where the demand for new boats exceeds the supply? The glut of Sea Rays in the repo segment doesn't help the used boat market, but that is not a new event.

The author is giving the perspective of the auctioneer's business, which we all know has been brisk. I was aware of that perspective, but I'm also looking at this from a new boat buyer's perspective and it does not seem that I have the leverage on a purchase this year that I had last year based on inventory and pricing. That might steer new boat buyers to the used boat market this year.

 

[rondds]

You want to see inventory? Check the repo sites. An awful lot of boats that would have normally wound up with a broker are now winding up here. Brokers don't want the inventory so they aren't taking trades unless the boat will be easy to move. With the standard 15 year note at 6 or 7%, in this market, a new boat or late model used boat buyer is upside down the minute they drive that boat home. Boats just depreciate too fast, even in a good economy. One little bump in the road (job loss, illness, etc.) and the first thing to go is the "luxury item."

 

[dpmulvey]

A very good source tells me that the local Sea Ray dealer here will only be ordering boats when A customer wants one built, selling a 50+ footer out of a catalog? ...

It will be the future and the sooner the manufacturing process catches up to accomodate this new business model, the better IMO.

 

[keokie]

I still see it as a blood bath. I found a boat for a buddy of mine. After a bit of negotiation, he owned it for 24K. It is a clean '99 Formula 31 PC with big blocks and all options. There were other comparable boats from Sea Ray and Formula he was looking at in that same price category. It's amazing.

 

[tobnpr]

I work with Yachtworld on a daily basis. There is no reason to inflate the sold number since there is no way for prospective clients to ever see that number unless the broker is looking at numbers to list a current boat at or showing a client similar boats to what he has listed. Trust me when I say there is no reason a broker would want the customer to look at an inflated number when they are listing their current boat. Why you ask? Because the higher the price, the longer it will take to sell and if its not realistic its simply a waste of time to list the boat. Also juding by what I am seeing on Soldboats as far as what is currently being sold, its a blood bath. If they are inflating these numbers the boats must have been given away! lol

Also, Yachtworld can perform a listing audit at any time to any broker at random and they ask to see actual documentation of what the boats actually sold for. Any discrepency and they are no longer allowed to use Yachtworld. I have seen this done 2 times that I know of. When a boat is pegged sold, the broker MUST put in a sold number or it cannot be marked sold. Some companies just delete the listing to avoid this.

Just repeating what I was told by a broker when I was boat shopping...
Just like you wouldn't want a bank-owned short sale in your neighborhood used as a comp (which you can't avoid now), they would try to avoid showing distress or below-market sales which would tend to pull the average selling price down. And since brokers work on a % of the sold price, doesn't this make sense?