Bump's World

THE BOTTOM

In the last two weeks there has been a significant increase in yacht sales activities. This increase is confirmed by our Yacht World report, which shows an increase of three times as many visits to our yacht listings than just two weeks ago. We not only had many more showings, but those showings have resulted in several yacht sales. August is typically a very slow sales month, since everyone is out using their boats, and it is not until the Newport Boat Show in September that they decide to sell or move up to a newer or larger yacht. So why the sudden increase in activity?

The overall consensus is that the downturn in the economy has bottomed out, and now we will now begin a recovery period with a return to the good times. When the economy weakens people hold back on their purchases. The weakening financial situation makes people act more conservatively and nervous about their spending. You do not want to buy as the economy weakens because with deflation the prices are forced down. So why buy when next month the car, house, or boat might even be cheaper? The buyers wait and watch. They wait for the sellers to crack. In a down market the seller can offer a fantastic deal, however the buyer believes deals may get even better. We have buyers make an offer, the offer is accepted, and then the buyer with draws his offer because he fears it must have been too high.

The stock market is showing a recovery. The market hit a low of 6500 last spring and has climbed back to 9500. The market still has a long way to go to get back to 14000, however it is definitely trending in the right direction. Banking and other business news looks much better and our ever-brilliant government says we are at the beginning of a big recovery, and things will be better than ever. Even Canada announced yesterday the recession is over. Everyone knows the Canadians would never lie.

So we must be at the bottom of this recession. If we are at the bottom then we should begin to see upward pressure on pricing.People, who held off putting their boat up for sale, because they felt they would get badly beaten up on the price, are now on the phone to us to discuss what we think they can get for their boat now. Unfortunately the buyers are not ready to offer more. The increased activity shows that buyers are starting to think that the days of desperate sellers many be limited, however right now the buyer is still seeing how far down he can reach.

Looking back at boat sales history we might reflect on the difficult yacht sales time of the late 1980's and early 1990's. In 1987 if you bought a new Sabre 36 you paid about 125K sailaway.In 1991 several Sabre 36s were on the market asking around 110K. Offers came in on these boats in the mid 80's and most eventually sold in that range. Several of these same boats came back on the market in 1997 through 2000 asking again 110K and sold for between 95k to110K depending on condition and gear. These boats went up in price during that time period. By 2006 & 2007 where was some depreciation due to older gear, electronics, sails, etc. and these same boats were now selling for 80 ish. Since the economic disaster in the fall 2008 up to today only 1 or 2 Sabre 36s have sold and they have sold for mid 60s.

The economic downturn of the late 1980's caused a sales environment very similar to what we see today. Initially prices where forced down, however as the economy rebounded the prices went up again and buyers who bought at the bottom of that market had huge smiles on their faces. Us brokers used that as a sales tool in the later 1990's telling people that sellers where selling for more than they had paid a couple of years earlier.

I believe we have hit the bottom and those buyers who take advantage of this situation will have big smiles on their faces in a couple of years.

Please mail comments to me at Bump@newwaveyachts.com

Bump Wilcox