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Buying Frenzy Leads to Inventory Shortage


Ronnie

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From Trade Only Today;

Marine dealers say interest and sales of new boats remained strong in August, but said lack of inventory created a headwind to retail activity.

“August would have been much better if we had more inventory,” wrote one of 86 dealer respondents to the Pulse Report, a survey by Baird Research that gauges monthly market conditions. “The inventory that we were getting was getting sold before we could even unload it." 

Components were also creating challenges for dealers.

“Resupply of boats, motors and trailers,” wrote another respondent, when asked what is not working for business. “Our suppliers can’t produce to match demand. And this will carry over into 2021. Indeed, one of our boat lines will not get us new boats until March 2021. A year that started with doubt and anxiety ended with a total wipeout of inventory -- it was crazy.”

Eighty-two percent of dealers reported that new boat inventory was too low, and 89 percent said used boat inventory remains extremely lean and near record lows, according to the survey that is administered in conjunction with the Marine Retailers Association of the Americas and Trade Only Today.

Dealers also grew more concerned about the pandemic’s long-term potential fallout, as well as the upcoming presidential election; dealer sentiment on current conditions edged down to 87 from its record 91 in July. 

"Still worried about what happens with the virus and with our political situations in the country and in our area,” wrote one dealer. “These are bound to cause further anxiety in our industry for the upcoming months and perhaps years.”

The three- to five-year outlook dropped from 65 in July to 59 as several expressed concern about new boaters staying in the recreation. 

"I am being a bit conservative with my orders going forward when it comes to new boat inventory,” remarked one dealer. “My thoughts are that the next year or two, the market is going to get flooded with boats from those new boaters that did not know what they were getting into or got financed and cannot make the payments. This will, however, create opportunities to buy pre-owned boats at great prices." 

“Waiting for the other shoe to drop on the economy and when new buyers realize they have to store and maintain their Covid boat,” said another. 

One Florida dealer said he was already seeing new buyers struggle with the cost and lack of availability of storage.

“I’m very afraid the industry is going to blow the opportunity with new boat owners from this boat buying frenzy,” wrote another. “We are in by very poor support from vendors. Dealers are doing the best they can with the cards dealt by vendors.”

 

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We got the last slip available at the Marina on our lake.  Some other marina had a 50' slip available.  I thought that was a bit excessive for my Malibu.

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Our lake has a small marina, about 40 spots.  only a handful are available for the entire season.  Most of them are kept available for guests who use the RV park next door.  

I am told the waiting list for seasonal marina slips grew from an average of 10 to over 250 in May.  Our lake is the only one within 60 miles, and the only one within 150 miles that is kept full all summer long.  Weekends were incredibly crowded.

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The lakes I use were more crowded than usual as well, I also noticed a lack of etiquette. A fully loaded boat learning to wakeboard doing circles around us. My wife wanted to quit going to the lake right then and there. To their credit, the next time I saw them they were sticking to a line, so they were learning.

Regarding inventory, I rolled the dice and purchased my VLX this fall thinking that the people who wanted a boat this summer and didn’t get one will still want one next spring. I think used prices won’t return to normal until mid summer next year and used storage/winterizing as a bargaining chip this fall.

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4 minutes ago, MarkN said:

The lakes I use were more crowded than usual as well, I also noticed a lack of etiquette. A fully loaded boat learning to wakeboard doing circles around us. My wife wanted to quit going to the lake right then and there. To their credit, the next time I saw them they were sticking to a line, so they were learning.

Regarding inventory, I rolled the dice and purchased my VLX this fall thinking that the people who wanted a boat this summer and didn’t get one will still want one next spring. I think used prices won’t return to normal until mid summer next year and used storage/winterizing as a bargaining chip this fall.

Your logic about inventory is in contradiction to mine I think.  Sounds like you are betting that the high demand will return/continue next spring, driving prices up once again.  My thinking is that this winter and next spring, many of the folks who rushed into purchasing a boat will be looking to sell.  The high number of units on the used market will drive down prices, maybe dramatically.  Most who bought new or used this summer (up to now, basically) paid a large premium due to low inventory and high demand.  Next spring, the inverse will be true.  There will be high inventory and reduced demand, resulting in lower prices.  The declining market for used boats will require manufacturers and dealers to sell at a discount (with rebates or whatever) to stay competitive with the falling costs on the used market.  

Some folks will only buy new, but I think they are the exception.   

Short story, I think selling a boat in the next 24 months is going to be a tough deal.  Malibu and similar boats hold their value very well, but if there are dozens of comparable models for sale in the area, the prices will be pressured downward.

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So do we have any data that shows more boats were actually sold this year compared to last? I heard RV folks ramped up production and sold 30% more, so a glut of units on the market there makes sense.   But I haven’t heard the same on boats and it seems between the period of shutdown, supply chain issues, and Malibu indicating they are already filling up quickly I don’t see necessarily that there was a glut of boats produced this year.  If that is the case, I can certainly see demand outpacing supply for the next year.  Hypothetical example, but if Malibu typically sells 7000 units a year, and this year they were only able to produce 6500 units, then there wouldn’t be oversupply in the market.  Heck, they couldn’t produce enough for a normal demand year let alone a Covid boosted demand year.  

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5 minutes ago, hethj7 said:

So do we have any data that shows more boats were actually sold this year compared to last? I heard RV folks ramped up production and sold 30% more, so a glut of units on the market there makes sense.   But I haven’t heard the same on boats and it seems between the period of shutdown, supply chain issues, and Malibu indicating they are already filling up quickly I don’t see necessarily that there was a glut of boats produced this year.  If that is the case, I can certainly see demand outpacing supply for the next year.  Hypothetical example, but if Malibu typically sells 7000 units a year, and this year they were only able to produce 6500 units, then there wouldn’t be oversupply in the market.  Heck, they couldn’t produce enough for a normal demand year let alone a Covid boosted demand year.  

Agreed.  RVs are a slightly different animal because you can use an RV all year long.  I doubt the demand curve for RVs is as steep in May and June as the demand for boats.

I don't watch the new market much, but I watch the used market pretty closely.  Inventory is limited in our area typically because our season isn't as long as in other places.  Prices this spring and summer in the used market have been ridiculously high, and everything sells very quickly.  Same with RVs.  Lots of people entered the boat and RV market because their typical leisure activities were not available (no flights, no hotels, etc), so they invested in leisure actives that they could control.  The demand in our area was so nuts, I briefly thought about selling the 23LSV, thinking I could pick up another one in the spring at a discount.  But when I try to play markets, I typically get hosed so I left it alone.  Nothing wrong with my boat, and it's paid for.

when things return to 'normal' (whatever that means), I think many of these boats will be back on the market.  This will oversupply the used market, driving down prices.  Regardless of how many boats Malibu can produce, if the used market is getting cheaper, dealers will have to price their boats accordingly to keep moving inventory.

This is all theory.  It will be very interesting to see how it plays out.  

 

 

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I think some of those people who got into will love it and keep the market going, but a lot of people will spend all winter staring at the  money pit in the garage and decide to get out.  Especially those who may have had some expensive maintenance items come up will be likely to sell.  

What will be interesting is that they will list the price for what they paid and if everyone does the same, it will buoy the prices up to some degree.  I think that is the only thing keeping prices up now.  Eventually, reality will set in.  

Looking hard for a boat right now has been frustrating.  Some of the most ridiculous ads at crazy inflated prices.  I find it pretty frustrating when I have to ask for a picture of the interior of the boat because of the 10 pictures, 3 of them are of people surfing, 2 of them are of the interior at night, and 5 of them are from the outside with their dog peering over the rubrail.   I have almost thought of starting a thread called 'least serious want ads' because some are downright satire.   I haven't even bothered with a few that I might be interested in because the price is so inflated that I don't know where to start, or it is just clear from the lack of attention to the ad that they haven't put more than 5 minutes of effort into selling it.  

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4 minutes ago, TallRedRider said:

I think some of those people who got into will love it and keep the market going, but a lot of people will spend all winter staring at the  money pit in the garage and decide to get out.  Especially those who may have had some expensive maintenance items come up will be likely to sell.  

What will be interesting is that they will list the price for what they paid and if everyone does the same, it will buoy the prices up to some degree.  I think that is the only thing keeping prices up now.  Eventually, reality will set in.  

Looking hard for a boat right now has been frustrating.  Some of the most ridiculous ads at crazy inflated prices.  I find it pretty frustrating when I have to ask for a picture of the interior of the boat because of the 10 pictures, 3 of them are of people surfing, 2 of them are of the interior at night, and 5 of them are from the outside with their dog peering over the rubrail.   I have almost thought of starting a thread called 'least serious want ads' because some are downright satire.   I haven't even bothered with a few that I might be interested in because the price is so inflated that I don't know where to start, or it is just clear from the lack of attention to the ad that they haven't put more than 5 minutes of effort into selling it.  

:plus1: - We are in the market as well and it has been super frustrating.  I like the idea of your "least serious want ads". Just came across a 2016 23 LSV with a reduced price of $109k with no notable options! What I am interested in watching are the ads that say they are selling because they are buying a new boat/have a new boat on order, yet are asking a ridiculous price. Are they going to drop the price by $20k when it doesn't sell or did they just put they are ordering a new boat in the add instead of saying "hoping to find a sucker to buy my boat"?

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I have been watching the used fishing boat market here locally all summer. We bought a riverfront house and wanted a second run around boat. So I have been looking for things under 10k. Everything has been way up and sells quickly. Occasionally a solid price, but all gone in a day. Now that Labor day is past the prices are softening, but not as much for sale.

Read one standup jetski ad that even called itself out for being over priced. It said "I know this is a crazy price, but if you wanna pay I will sell"

My gut says this whole thing will stay another summer and demand and use will stay high. Plenty of people are ready to return to normal life regardless, but I also know plenty of others that are scared and will stay away from normal life for a good long time.

I also agree with @TallRedRider that people who just bought wont list for pre pandemic prices. They will list for inflated market value of when they bought.

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1 hour ago, hethj7 said:

So do we have any data that shows more boats were actually sold this year compared to last? I heard RV folks ramped up production and sold 30% more, so a glut of units on the market there makes sense.   But I haven’t heard the same on boats and it seems between the period of shutdown, supply chain issues, and Malibu indicating they are already filling up quickly I don’t see necessarily that there was a glut of boats produced this year.  If that is the case, I can certainly see demand outpacing supply for the next year.  Hypothetical example, but if Malibu typically sells 7000 units a year, and this year they were only able to produce 6500 units, then there wouldn’t be oversupply in the market.  Heck, they couldn’t produce enough for a normal demand year let alone a Covid boosted demand year.  

My sense, assuming we're only talking tow boats, is there were less boats built in the 2020 model year than in 2019. Looking at Malibu, they were shutdown for just under a month and you have to imagine there were some ramp-up weeks before they got back to full production. While Malibu had planned for more 2020 build slots than in 2019, knocking out a month of production would at least cancel out that growth, and most likely means fewer boats were built overall. Mastercraft seemed to struggle more with a longer shutdown and longer ramp up to capacity. At least that's what I can glean from their public info and calls. Nautique and Skiers Choice don't tend to bend over backward to open up extra slots either, so they had be down year over year. 

FWIW, every new boat owner in my circle this year is completely in love with their new hobby, and quite a few are already planning extensive boating trips next year (Shasta, Chelan, CDA, etc.). And a number of their friends who went out with them this summer are now looking to get into boating for next year. I'm on the fence as to how this plays out, and the return of summer sports could pull back some of the demand, but I actually think there's a strong case for another big surge in demand for 2021.

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Personally I think they is only going to be a spike of inventory next year and people wanting to get out of their boats if they can return to the “norm” they had before. Be it family vacations all over, kids sports all week and weekend or whatever it may be. If all of that is still “suspended” or limited then I think the boat market, new and old is going to be hot. Malibu isn’t full for new order months out right now because us “regulars” or guys that flip have their orders in already. I think it’s because new people are ordering or people that tried it out this year love it and are upgrading. 

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33 minutes ago, ahopkinsVTX said:

Personally I think they is only going to be a spike of inventory next year and people wanting to get out of their boats if they can return to the “norm” they had before. Be it family vacations all over, kids sports all week and weekend or whatever it may be. If all of that is still “suspended” or limited then I think the boat market, new and old is going to be hot. Malibu isn’t full for new order months out right now because us “regulars” or guys that flip have their orders in already. I think it’s because new people are ordering or people that tried it out this year love it and are upgrading. 

I agree that if there are still shutdown orders, toys will be in high demand.

I guess i am thinking that after the election and thru the winter that some common sense will prevail and our benevolent governors will allow us to do stuff.  maybe im too optimistic.

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1 hour ago, kylesullens said:

I agree that if there are still shutdown orders, toys will be in high demand.

I guess i am thinking that after the election and thru the winter that some common sense will prevail and our benevolent governors will allow us to do stuff.  maybe im too optimistic.

Who knows at this point...

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7 hours ago, granddaddy55 said:

after the Nashville , Tennessee story on virus cases in bars tonight,  im betting opening is going to speed up

Seems like just yesterday you were not allowed in your boat in the middle of the lake in some states! Haha man how that could of killed the boating industry if continued much longer..

I'm sad for restaurants, bars , travel industry.. we are picking winners and losers.. not good.. 

Boating is still high demand at least through next year due to back orderers and future orders. I'm will continue into next year so long as there is not some major catastrophe. Lake homes will continue to rise as those NBs try to find a place rather than trailer and interest rates remain free money then a lake place is a heck of a deal compared to a few typical vacations. 

The one issue I see is a larger than normal inflation

1. Mortgage rates below true inflation rate is free money. Home prices especially waterfront skyrocketing across the board (smart by FEDs during pandemmy)

2. Material shortages leading to skyrocketing prices.. anyone tried to buy wood lately? Averaging about 2X the price!!!!! Demand off chat and shortages from shut downs

3. Demand is high supply is low so that ol supply and demand price curve comes to life. 

4. Umm we printed like 6-8 Trillion dollars overnight.. sorry but your dollar is only worth 75-80 cents now... 

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It will all eventually coming crashing down.  I'm good about being patient and will wait for it to do so.  Once the bubble pops, I'm in for an upgrade.  Mine won't take the resale hit the newer boats will, so I will be very good shape.

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1 hour ago, oldjeep said:

I think there is going to be a glut of boats with cracked blocks in the spring.

and I'll be waiting for great deals. 

 

Many dealers did not increase their allotment for 2021 boat builds. At the time those allotments needed to be locked in, the market hadn't increased insanely yet.

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