Airplane prices soaring?

[ryoder]

I window shop on barnstormers mainly and have noticed a lack of inventory, quick sales, and what seems like high prices over the past few months.

I have seen this with used cars and of course property values.

Anyone else feel the same way?  I think it’s due to stimulus and general economic growth.  I sold my 162 in January and will get back into ownership in about two years or so. Hope I’m not priced out.

[EricJ]

54 minutes ago, ryoder said:

Anyone else feel the same way?  I think it’s due to stimulus and general economic growth.  I sold my 162 in January and will get back into ownership in about two years or so. Hope I’m not priced out.

I suspect things may come back down a bit after things get back to as much post-pandemic normal as they're going to, whenever that may be.   Whether it comes back down to where it was is a good question, and the prices may wind up higher than they were, but probably not as high as now.    My crystal ball is not always reliable, but that's how it looks from here.

 

[aviatoreb]

1 hour ago, ryoder said:

I window shop on barnstormers mainly and have noticed a lack of inventory, quick sales, and what seems like high prices over the past few months.

I have seen this with used cars and of course property values.

Anyone else feel the same way?  I think it’s due to stimulus and general economic growth.  I sold my 162 in January and will get back into ownership in about two years or so. Hope I’m not priced out.

Supply and demand.

I just now took a peek at controller and I see there are exactly 4 M20K's for sale.   Usually its two full pages.  No wonder they are asking high prices - you can't even get one.  Maybe I should increase the insurance base on my M20K!

[BKlott]

I believe that the lack of maintenance and upkeep on the existing fleet, coupled with a lack of aircraft production has resulted in fewer viable aircraft being available to meet demand. Sure, you can purchase a plane with a high time engine, lousy paint, worn interior and avionics from the 1970s. Then you can drop $75,000 to $100,000 (or more) into it, to resurrect it into being a nice, up to date airplane again. But how many guys are capable of and willing to do that?

The relatively few nice and up to date airplanes that are available will continue to be snapped up when they hit the market because knowledgeable buyers will recognize their value. They’ll also recognize how unlikely it is that they will find a nicer aircraft no matter how long and hard they look.

 

[A64Pilot]

It’s not just Mooney’s, or even aircraft, Boats, RV’s, cars and houses are selling at unusual high prices and rates, so much so that the supply has dried up for houses and everything else.

‘I don’t think it’s economic growth, I wish it was, I think it’s simply just cheap money, I bought a house and hanger because of it, one that if interest rates were normal as in 7ish percent or so, I wouldn’t be able to afford, but I got a loan at 2% and guess what, I bought, many are, I’m not alone, I bought the Mooney for cash, because the boat sold so well. I should have invested the money and waited until prices drop, which they will, but I don’t know when.

‘It’s an artificial thing, it’s houses selling pre 08 thing, it’s not going to last. Already this quarters inflation rate is the highest it’s been in the last 9 years. I’m not saying the bubble will burst, but if your thinking about selling, NOW is the time, for buying you should wait if your a cash customer, if your borrowing, maybe not.

 500k at 7.8 is $3600 for 30 years

500K at 2% is $1800 for 30 years 

I picked 7.8 to show its double the 2% payment, but historically 7.8 isn’t outrageous

Interest rates were pushed down to “stimulate” the economy which simply means getting people to go into debt, and it’s working.

‘Question is of course how long can or will that continue?

Edited April 21, 2021 by A64Pilot

[carusoam]

The fed reserve has the ability to change the base line interest rate...

The guy who runs that show is JPowell...

JP has been very clear about keeping interest rates where they are now for a long time... a year can be pretty long in this game...

This will boost the economy to a growth rate we haven’t seen in several years...

If you remember the 2-3% growth rate was called the new normal....

We are headed for something more in line with the old normal.... real economic expansion...

 

Change can be tough to get used to...

We are seeing some inflation that goes with that...

Vaccines are being used, world wide...

People are getting back to work...

Companies are re-opening...

Keep both eyes open when making economic decisions...  some things that were good during the pandemic... make not be as good after the re-opening...

 

Have you seen the chip shortage where you are?   Something that will drive up the costs of anything with a computer in it... and delay it’s manufacturing for a few weeks....

The fed reserve has a dual mandate... improve employment, and maintain price stability....

Keeping interest rates low helps get everyone back to work.... once everyone has a job... the interest rates will rise to keep inflation in check...

PP thoughts only, not an economist...

Go Mooney!

Best regards,

-a-

[carusoam]

Part two...

Planes are in short supply...

They always have been...

But, since the world has been busy with other things... it hasn’t been noticeable...

Prices of Mooneys are right back to about 2007 levels... where nice M20Js are over 100amu...

Expect prices to rise some more...  the inflation for the last decade and a half hasn’t been accounted for in those 2007 prices yet...

Hard to tell where the future is going to go....  but the number of Mooneys is currently declining faster than they are increasing...

An expanding economy is more enjoyable than a contracting one...

Controlled inflation is much better than uncontrolled inflation...

PP thoughts only, not a banker...

Go Mooney!

Best regards,

-a-

[carusoam]

Note for Ryan...

If you look back about seven months... this is coincident with the vaccines being announced.... and the dismal malaise started to let up...

Things started to move forwards again... without the vaccines even being available to people for months....

So anyone that was holding off buying a plane or a house... are now looking forwards to going shopping...

Plus, we have some good knowledge about staying healthy... how to avoid the virus, in place of fear of everything that moves...

 

One question....

Is it the roaring 20s again...?

It might start getting fun to travel again....

Best regards,

-a-

[NJMac]

12 hours ago, BKlott said:

I believe that the lack of maintenance and upkeep on the existing fleet, coupled with a lack of aircraft production has resulted in fewer viable aircraft being available to meet demand. Sure, you can purchase a plane with a high time engine, lousy paint, worn interior and avionics from the 1970s. Then you can drop $75,000 to $100,000 (or more) into it, to resurrect it into being a nice, up to date airplane again. But how many guys are capable of and willing to do that?

The relatively few nice and up to date airplanes that are available will continue to be snapped up when they hit the market because knowledgeable buyers will recognize their value. They’ll also recognize how unlikely it is that they will find a nicer aircraft no matter how long and hard they look.

 

This is my understanding / explanation of the situation too. 

[Davidv]

Stock market at all time highs, government pumping funny money into economy.  On the high end it’s more dollars going after a limited supply of airplanes, boats, and houses.  On the lower end it results in employers like chain restaurants unable to get people to come back to work because of the payments.  Add on top of that an eviction ban, trillions more in spending, and it’s a recipe for disaster.  Sorry for going off topic but it’s all related. 

[ryoder]

I agree with everything said here. It’s really weird. I think hyperinflation is coming.

[A64Pilot]

4 minutes ago, ryoder said:

I agree with everything said here. It’s really weird. I think hyperinflation is coming.

I’ve honestly thought that for 20 years now, but with all this talk of spending trillions here and there, you may be right.

 I expect a whole slew of new taxes like a carbon tax for example will precede a large jump in inflation, not sure if it will be hyper, but I expect a return to the late 70’s and early 80’s.

 

[MIm20c]

JP et al will never increase the rates to a meaningful level. Any mention of that and the big money movers will just unload for a few months and “tell” him to get back in line. Nothing is going to change until someone comes to collect on (rule with) all the debt we owe...

[carusoam]

Macroeconomics class seemed so ethereal at the time...

 

Hyper inflation is a real possibility... but doesn’t have to happen...

High unemployment is already a real condition... but getting better...

 

The federal reserve has a dual mandate...

1) Maintain price stability...

2) Get everyone who wants to work, working...

 

The tool they use is slow to change, and comes with a long lag... but is incredibly powerful.

It is called the overnight interest rate...  which is as close to zero as it has ever been...

Some people may have the opposite fear... negative interest rates...

 

The guy at the controls for the overnight interest rate is named J Powell... federal reserve chairman...

JP has expressed his thoughts about when the interest rate would come off the stops a few times in his short tenure...

The first time he mentioned raising interest rates... it came with a verbal blunder... that got widely misinterpreted...

Discussing raising interest rates on auto-pilot... the finance world doesn’t use an autopilot like pilots do... the mis-interpretation took three months to recover from...  with an oops my bad, you guys should know what I meant...

Economics is one part science and another part psychology...

As terrible as spending the huge dollar values sounds... not spending the huge dollar values is worse...

Get everyone working...  or the money problems get more worser.... 

 

it certainly isn’t an easy problem to solve... and it isn’t a single variable problem...

 

Use caution with this discussion... as economic issues are closely related to politics... this can spiral quickly into a shut-down state...

All stuff I learned as a PP... not an economist...

Best regards,

-a-

[carusoam]

JP has tried to be clear about when the raise won’t begin...  or when they will start thinking about... thinking about... raising interest rates...  

 

Imagine a day...  when you put your money in a savings account... and you could live off the interest...  

With the inflation rate less than half of the interest rate...

 

This is tough because everyone is living in a much better health style.... they eat better, throw on some moderate exercise, don’t smoke, have medications to cure common deadly diseases... they essentially live a longer more prosperous life...

They are going to need more money to go the distance...  

It has been decades since the live off the interest mantra was remotely possible...  parents probably stopped teaching this idea to their kids...

Expect that the next discussion to touch on is Social Security... that always looks like it will run out by the time Gen-Xers get up to bat...

The age for retirement has slipped a couple of years already... from 65 to 67...

Stay healthy, enjoy the flight... avoid getting a health issue before your time...

economics can often sound miserable... or mysterious...

PP thoughts only...

Best regards,

-a-

[PT20J]

Personally, my most successful investment decisions have been to ignore predictions and stay the course, and my worst ones were trying to react to what I thought was likely to happen. 

[Hank]

25 minutes ago, PT20J said:

Personally, my most successful investment decisions have been to ignore predictions and stay the course, and my worst ones were trying to react to what I thought was likely to happen. 

Exactly! I changed jobs in 2004 and left myn401(k) there so that I would remember that they owe me a pension.

Then I moved enough times that they lost me. Found their website in 2018, proved I was me with the aid of some long conversations and a Notary Public. When I was able to log in, my account had more than tripled.

[AerostarDriver]

Taking a step back from macroeconomics, it depends on what your looking for. Moonies, Arrows, and commanches to a lesser extent are seeing unpresented demand with very few hang around on the market for more then a few days. However, I have a friend who just picked up a Maule M4 Rocket for 11K. My grandfather-in-law bought a 172D for 6K with mid-time motor. A better way to put it is, if you need a plane on a budget, their are deals to be had. If you want something particular, anything with a Lycoming 360 and retracts, Warriors, late model 172s, RVs with certified engines and glass panels, your in a sellers market.

[A64Pilot]

You can live off of interest, but you had better have a large sum to do so, or be very frugal, probably both.

‘However it’s not really all that hard to live off of investments, and if structured properly and your conservative enough, you can even survive a 1929 type of depression.

You just have to learn to live below your means, most can’t or won’t as their income increases so does their standard of living, and they stay perpetually in debt

[N201MKTurbo]

This is making my 172 project I bought for $13000 look pretty good.

[A64Pilot]

Has anyone priced building materials lately? 

‘Unless I’m being told untruths there is a huge  increase in plywood and other materials.

Several here have bought lots and construction costs have gone crazy, and it’s months before they can start as demand is so high, the construction guys are hopefully making a killing, I say hopefully because the money is going somewhere, I hope they get a cut. 

‘I’ve been told i’d you want a pool, maybe next year the back log is so bad.

Edited May 1, 2021 by A64Pilot

[cbarry]

As an economist, what we're seeing is as much of a lack of supply issue as it is an increase in demand.  Whenever supply shrinks and the monetary printing presses run (whether it’s from countries hoarding materials or because of reduced production) we stand to see stagflation as the resulting economic phase.  Stagflation (high inflation, high real unemployment and slow growth) is not desirable whatsoever.  The high inflation is being caused by a shortage of supplies due to many companies being being either offline or partially offline over the last year and countries and people hoarding materials.  The high real unemployment is a direct result of the flawed Keynesian economic theory that governments can actually stimulate the economy.  This is a complete farce.  Governments can no more stimulate the economy than sugar can build muscle.  The only historically proven way to see economic growth is to free the economy from restraints and let markets be markets.  The other force working on the lack of used aircraft on the market is simply the positive wealth effect.  The better people feel financially, the more they hang onto luxury items (like aircraft...).  A series of restraints (increase in taxes, rapid rise in insurance costs, an aging pilot population, etc) will eventually cause the supply to pick back up and the cycle repeats itself again.

 

[NJMac]

2 hours ago, A64Pilot said:

Has anyone priced building materials lately? 

‘Unless I’m being told untruths there is a huge  increase in plywood and other materials.

Several here have bought lots and construction costs have gone crazy, and it’s months before they can start as demand is so high, the construction guys are hopefully making a killing, I say hopefully because the money is going somewhere, I hope they get a cut. 

‘I’ve been told i’d you want a pool, maybe next year the back log is so bad.

We have some amazing land we're sitting on for building eventually.  11 acres nestled between a state scenic river and a 500 acre county park.  The business had entered a place where we felt comfortable increasing our living expenses so we hired an architect and drew up an amazing home.  The builder kept telling us, based on concept plans that we were looking at 850-900k. He turned in a bid on April for $1.3mm.  We of course declined and decided to keep putting money back so that when the next correction happens we can jump in and score a deal. 

[aviatoreb]

I sold a car this week on Craigslist.  I listed it for 1k than I hoped I would get for haggle room.  It sold for a little more than asking!  And a dealer no less - a big name brand dealer bought our 2017 car for way more than I thought dealers pay for cars.

[Hank]

12 minutes ago, aviatoreb said:

I sold a car this week on Craigslist.  I listed it for 1k than I hoped I would get for haggle room.  It sold for a little more than asking!  And a dealer no less - a big name brand dealer bought our 2017 car for way more than I thought dealers pay for cars.

Used car prices are up some. Used pickup prices are way up!

Just because they all need a computer chip that's in short supply, blamed on COVID, and many auto makers have "paused" production . . . .