The Boat Market - Financial Gurus?

[Chotu]

The sailboat boat market has changed in my lifetime. In my early life, it stayed pretty static. Nothing seemed to change. A boat acted as a store of value, but it did not protect you from inflation.

I think back to the boat my friend’s parents owned. When I was a kid. It was like a 1980 35 foot Pearson. Somewhere around there. I think they paid $80,000 for it brand new. And it was still worth $80,000 is basically forever. It never changed in price. Boats acted pretty much as cash. Until recently.

Now, I see three of these boats on yacht world. One for 17,000, one for 29,000, and one for 80,000. Why such a spread in these prices?

First, what changed the dynamic? When did boats in general start to lose dollar value, not counting inflation?

At what time did this change take place? Why did this change take place? Lack of interest in sailing? Lack of interest in used boats? Retiring baby boomers? And no one young can afford a boat? Unless it’s just live aboard? Maybe people prefer power boats now? Easier to run? What are some of the factors that have affected used boat prices?

As I look around in the harbors, I see brand new boats everywhere. It’s not like boats aren’t selling. There are no mornings available. Dock space is not available. Everything is on a waiting list. So it doesn’t seem like there are less boats out there. It seems like there are more and more. Is it just oversupply?

Do you see catamarans following the same general trend as monohulls? Or is it a case where monohulls are being devalued by catamarans?

You couldn’t find a cruising capable over 40 foot boat for under around 100,000 a few years back. Now, they seem to be everywhere for $30,000-$40,000. What’s going on with that?

[redneckrob]

Originally Posted by Chotu

The sailboat boat market has changed in my lifetime. In my early life, it stayed pretty static. Nothing seemed to change. A boat acted as a store of value, but it did not protect you from inflation.

I think back to the boat my friend’s parents owned. When I was a kid. It was like a 1980 35 foot Pearson. Somewhere around there. I think they paid $80,000 for it brand new. And it was still worth $80,000 is basically forever. It never changed in price. Boats acted pretty much as cash. Until recently.

Now, I see three of these boats on yacht world. One for 17,000, one for 29,000, and one for 80,000. Why such a spread in these prices?

First, what changed the dynamic? When did boats in general start to lose dollar value, not counting inflation?

At what time did this change take place? Why did this change take place? Lack of interest in sailing? Lack of interest in used boats? Retiring baby boomers? And no one young can afford a boat? Unless it’s just live aboard? Maybe people prefer power boats now? Easier to run? What are some of the factors that have affected used boat prices?

As I look around in the harbors, I see brand new boats everywhere. It’s not like boats aren’t selling. There are no mornings available. Dock space is not available. Everything is on a waiting list. So it doesn’t seem like there are less boats out there. It seems like there are more and more. Is it just oversupply?

Do you see catamarans following the same general trend as monohulls? Or is it a case where monohulls are being devalued by catamarans?

You couldn’t find a cruising capable over 40 foot boat for under around 100,000 a few years back. Now, they seem to be everywhere for $30,000-$40,000. What’s going on with that?

First I'd suspect any remembered depreciation rates. I remember boats that didn't have a lot of hours in preventive and corrective maintenance done every year depreciating rapidly years ago same as today.
But another fact people tend to forget is inflation. For quite a while now we've been in very low single digits inflation while the normal in the 70s and 80s was near double digits inflation. As a result, an $80,000 boat then that "kept" it's $80,000 value was actually depreciating at near double digits (again ignoring the maintenance and upkeep costs). A boat today that's losing 8% of it's value every year could very well from a pure financial math standpoint be depreciating at exactly the same rate as that $80,000 boat that "maintained" it's $80,000 value back in the day.

[Chotu]

Originally Posted by redneckrob

First I'd suspect any remembered depreciation rates. I remember boats that didn't have a lot of hours in preventive and corrective maintenance done every year depreciating rapidly years ago same as today.
But another fact people tend to forget is inflation. For quite a while now we've been in very low single digits inflation while the normal in the 70s and 80s was near double digits inflation. As a result, an $80,000 boat then that "kept" it's $80,000 value was actually depreciating at near double digits (again ignoring the maintenance and upkeep costs). A boat today that's losing 8% of it's value every year could very well from a pure financial math standpoint be depreciating at exactly the same rate as that $80,000 boat that "maintained" it's $80,000 value back in the day.

Well, that was certainly a short thread.

The most simple answer is usually the correct one. And I think that’s it. The changing interest rate. Prime rates were significantly higher back then. In the times that I’m remembering. So there was more loss of value going on just from that fact. Now, there isn’t as much loss of value due to the prime rate, so the depreciation is still there, just through actual dollar depreciation. That is actually a super interesting concept. Thank you for sharing that. Hadn’t been considering that.

So negative interest rates, if they come, will decimate boat prices right?

One more follow on question. What effect does the prime rate have on cost of labor? If we go negative interest rates, what would happen to labor costs? As in, say you had to do a refit. Would that refit cost more or less if we go negative interest rates? Thinking about Time and materials here.

[a64pilot]

If negative interest rates come, they have to be paid for somehow, either gradually or all at once.
At least that is what logic dictates, however many think it can go on forever, they are right in that “we” are financially in a pace we have never been before, so the rules confuse me.

However what people want or think they want in a boat has changed, and that drives prices. I assume maybe that Social media has changed society greatly, it seems that social pressures drive consumption more than ever, or maybe it’s just that I’m older and notice it, everyone it seems has to have a $1,000 cell phone, it matters not if they make minimum wage or not, and they all have to drive an SUV, even if a sedan would be much more practicable for them.

[Sailor 99]

It's simple really.

1) Sailboats have really changed. Most new sail boats are a floating condo. They have huge wide sterns, all the latest gadgets in side, no hard ships. They look good, seem to need no maintenance at the moment and can be bought on credit.

That many of them are poorly designed for a life at sea, that they don't sail well, that some of them have a dangerous interior layout that leaves nothing to hang on to as you try to move around a boat heeled over in 6 -10 foot waves is not readily apparent.

2) People do not have the skills or inclination to fix up these old boats and lots of places don't want them doing this fixing up at their docks or in their yards. No bank wants to finance a 30 yr old boat. They can not compete in space per linear foot category and don't have all the bells and whistles. The fact that these craft are more seaworthy does not enter into it because most boats rarely leave the dock for anything other than a day sail.

3) Then there is the fact that few if any boats actually die. which leads to a glut on the market. A 40 yr old fiberglass hull is likely just as good structurally as the day it was launched. The rig, sails, engines etc my all be very old but likely serviceable. To bring these boat up to snuff is quite expensive. Therefore they have no value in an over saturated market




The difference in price between the the 17K and 29K likely reflect condition, and the 80K boat is not really for sale. Likely someone is pressuring to have the boat sold so it is listed.

[redneckrob]

Originally Posted by Chotu

Well, that was certainly a short thread.

The most simple answer is usually the correct one. And I think that’s it. The changing interest rate. Prime rates were significantly higher back then. In the times that I’m remembering. So there was more loss of value going on just from that fact. Now, there isn’t as much loss of value due to the prime rate, so the depreciation is still there, just through actual dollar depreciation. That is actually a super interesting concept. Thank you for sharing that. Hadn’t been considering that.

So negative interest rates, if they come, will decimate boat prices right?

One more follow on question. What effect does the prime rate have on cost of labor? If we go negative interest rates, what would happen to labor costs? As in, say you had to do a refit. Would that refit cost more or less if we go negative interest rates? Thinking about Time and materials here.

Negative prime rates would put us in mostly uncharted territory for the modern era. Keep in mind when people say negative interest rates now they're generally referring to sovereign debt rates although I did read about a negative rate mortgage I think in Denmark. It's generally agreed that deflation devastates economies because no one is incented to buy anything or loan money so investments dry up. That and the fact that the last time we had widespread deflation they called it "The Great Depression" Since interest rates are generally a bit higher than inflation, negative rates would tend to imply deflation which would generally have economy-wide impacts that would drown out any specific impact on something like boat prices or labor. But in general, you'd never buy a boat or get that work done because if you wait just a bit longer it will be cheaper. Which leads to widespread unemployment and oversupply of stuff like boats, which leads to people willing to accept lower prices, which leads labor and goods prices to decrease, which leads you to wait even a bit longer to buy, which leads to..... That said we do see predictable and universal deflation in things like computers and TVs and we still buy them, so like I said, a bit uncharted territory if it happens at an economy wide level.

[Pete7]

Originally Posted by a64pilot

maybe it’s just that I’m older and notice it, everyone it seems has to have a $1,000 cell phone.

Astonishing isn't it. We don't have hand me downs in our house, we have hand me ups I am doing nicely when the kids 26/23 buy a new phone.

Pete

[landsend]

Maybe the boats are getting really old!! 70's boat is approaching 50 years old. The investment to bring it to up to a decent standard is quite a bit.

[tomfl]

Originally Posted by redneckrob

Negative prime rates would put us in mostly uncharted territory for the modern era.

SNIP

That said we do see predictable and universal deflation in things like computers and TVs and we still buy them, so like I said, a bit uncharted territory if it happens at an economy wide level.

Without getting too far in the weeds things like computers are viewed by some economists as consumables which have a limited life span while things like fixed assets have a much longer usable life span.

Truth be told economists are still not of one mind about the Great Depression and it's causes.

The biggest problem with trying to make rules about the boat market is that most market analysis is based on undifferentiated commodities. An example is if you buy a Honda outboard it is the same as all Honda outboards with the same price as all Honda outboards (lets ignore the few lemons or sales). On the other hand any used boat is likely much different in terms of how it has been maintained and abused/used. Not to mention boat sellers can distort things since they can be motivated or not.

To start answering your questions the price spread is the result of things like the condition of the boat, how much the owner wants to sell, and to some extent things like maybe the owner's wife wants the boat sold and the owner prices it way to high because he does not want the boat sold.

While computers were mentioned earlier as a consumable I would note that in some ways boats have had a similar situation in terms of how they are produced. I can remember when almost every boat was wood. Today almost everything is fiberglass. It is easier to build and maintain. Not to mention once you have a mold you can mass produce them.

Not only has boat building changed, but boat design as well. No question boats like Corsair trimarans, Hobie cats, and the like have changed how the public views sail boats. They are faster, easier to sail, and offer a huge fun factor compared to something like an H28. While I loved sailing on an H28 it does not compare to how much fun it is to sail on a C27, or even more so for a C31.

One development I have noticed is a huge increase in the number of semi derelict boats with basically homeless people living on them. Another development is the number of dock queens that are basically like a trophy wife to some folks. Combined with the movement to tear down marinas and replace them with high rise waterfront condos means fewer slips and anchorages for an increasing number of boats.

While I sorta understand the $US30,000-40,000 blue water capable boat question the truth is not all of the are blue water capable. They may well have blown out sails, motors that have lots of hours, standing rigging that needs at least inspection (and probably replacement), electronics that are outdated if they work, and fridge that needs repair.

On the upside even in a very crowded Florida where I sail I can get on my boat and if I sail for a day can usually find a place to anchor where I am the only boat around; or at least not close enough to another boat to care.

I am not sure boats were ever an appreciating asset. As others have pointed out inflation, or lack of inflation, may have distorted your view. I can remember a great looking older H28 (docked next to my Dad's boat in the 1950s) with lots of bright work that probably lost half of it's value over maybe four years because the owner simply did not maintain it and it had a leak around a hatch that allowed rot to take over.

[kev_rm]

I seriously doubt real dollar boat depreciation curves have changed in the last 30 years. You might be remembering a brief period in time with high inflation?

[MJH]

Originally Posted by Chotu

The sailboat boat market has changed in my lifetime. In my early life, it stayed pretty static. Nothing seemed to change. A boat acted as a store of value, but it did not protect you from inflation.

I think back to the boat my friend’s parents owned. When I was a kid. It was like a 1980 35 foot Pearson. Somewhere around there. I think they paid $80,000 for it brand new. And it was still worth $80,000 is basically forever. It never changed in price. Boats acted pretty much as cash. Until recently.

Now, I see three of these boats on yacht world. One for 17,000, one for 29,000, and one for 80,000. Why such a spread in these prices?

First, what changed the dynamic? When did boats in general start to lose dollar value, not counting inflation?

At what time did this change take place? Why did this change take place? Lack of interest in sailing? Lack of interest in used boats? Retiring baby boomers? And no one young can afford a boat? Unless it’s just live aboard? Maybe people prefer power boats now? Easier to run? What are some of the factors that have affected used boat prices?

As I look around in the harbors, I see brand new boats everywhere. It’s not like boats aren’t selling. There are no mornings available. Dock space is not available. Everything is on a waiting list. So it doesn’t seem like there are less boats out there. It seems like there are more and more. Is it just oversupply?

Do you see catamarans following the same general trend as monohulls? Or is it a case where monohulls are being devalued by catamarans?

You couldn’t find a cruising capable over 40 foot boat for under around 100,000 a few years back. Now, they seem to be everywhere for $30,000-$40,000. What’s going on with that?

The bottom line is that the value of an item is still what someone thinks it is worth but, to be sure, sellers only need to find the one buyer willing to buy their boat at a fair price.

Obviously the market has changed just as every thing has changed over the years, that includes the buyers and sellers themselves. Neither appears to have the patience of days gone-by...everyone wants their desires filled quickly and few want to spend the time to research and/or do the physical work required for the proper timely transaction...just look at some of the boat ads on the Internet, the photo staging is poor and some specifications quoted are inaccurate.

~ ~ _/) ~ ~ MJH

[Scorpius]

There's too much money in the world (that it's inequably distributed is a topic for another day). Having a boat is a status symbol and people with more money than they know what to do with, buy one. They wouldn't be caught dead buying used and there's a HUGE sophisticated marketing machine out there catering to them with GORGEOUS new boats. They use the boat only occasionally, if at all, it either deteriorates from lack of maintenance, or the owner grows disillusioned with the cost and effort of maintaining and keeping it, or his health changes, or he dies and the widow is stuck with the boat, and it goes on the USED market - along with THOUSANDS of others. Hence a flooded market and low prices. Unfortunately the quality used boats are caught up in the cycle along with the plastic eye candy.

And, as has been pointed out earlier, plastic never dies and the inventory just keeps growing - unlike in the days of wooden boats and iron (wo)men

[barnakiel]

Originally Posted by Chotu

(...)


You couldn’t find a cruising capable over 40 foot boat for under around 100,000 a few years back. Now, they seem to be everywhere for $30,000-$40,000. What’s going on with that?

Well, in those few years those 100k boats got a few years older, I think.


I, anyways, did not have any problem sourcing a 30-40k 40' boat ten years ago either. Perhaps back then you were looking for one in wrong places?


Old boats are cheap and will only get cheaper. They are more and more every year. And nobody wants an old grp mass produced boats except for a downright lunatic.



b.

[ferrailleur]

Originally Posted by Scorpius

There's too much money in the world (that it's inequably distributed is a topic for another day). Having a boat is a status symbol and people with more money than they know what to do with, buy one. They wouldn't be caught dead buying used and there's a HUGE sophisticated marketing machine out there catering to them with GORGEOUS new boats. They use the boat only occasionally, if at all, it either deteriorates from lack of maintenance, or the owner grows disillusioned with the cost and effort of maintaining and keeping it, or his health changes, or he dies and the widow is stuck with the boat, and it goes on the USED market - along with THOUSANDS of others. Hence a flooded market and low prices. Unfortunately the quality used boats are caught up in the cycle along with the plastic eye candy.

And, as has been pointed out earlier, plastic never dies and the inventory just keeps growing - unlike in the days of wooden boats and iron (wo)men

Sad but true... too many wannabee sailors with too way much money (at the time) to impress too many short lived impressionable younger flirting women as seen on the decks or at the helm (all over ads in Sail and Cruising World!)

Two years later... THE THRILL IS GONE …. the women has disappeared... the $$ is gone... and the dream boat is soon becoming a deeply discounting floating semi-derelict!

[a64pilot]

Originally Posted by Pete7

Astonishing isn't it. We don't have hand me downs in our house, we have hand me ups I am doing nicely when the kids 26/23 buy a new phone.



Pete

Now I’m not speaking to your kids, so don’t think I am., please.
My Wife used to teach at a title something school, which meant that the kids were poor, everyone qualified for a free lunch, and most lived in public housing etc.
Yet every one of them had the latest greatest IPhone, they all laughed at my Wife’s old small phone.

You know someone is homeless when you see them sitting outside of a grocery store etc that has an outside wall outlet and they are recharging their smart phone using the outlet.

I don’t understand it, I’m not knocking them, but don’t understand why this is?