House Boat

“Life is about timing.” – Carl Lewis

The housing ATM keeps spitting out money. Yesterday, in the LA Times, Richard Verrier wrote an article in the business section entitled, Sales of Pleasure Boats Buoyed by Soaring Home Values… Buyers flock to the L.A. Boat Show. California purchases rose about 8% last year to $540 million.

At the boat show, Verrier interviewed David Yates, a 48-year-old Burbank resident, who is a manager for a cabinet manufacturer and he said, “We couldn’t have afforded to come here before, but now that my house has doubled in value, we have an opportunity to take out a second mortgage.”

Verrier continues by writing, “Yates had plenty of company during the event at the Los Angeles Convention Center, which drew an estimated 25,000 lookers and buyers over the weekend. California’s hot real estate market has helped power a rise in boat sales by allowing people to borrow against the soaring value of their homes to buy boats and other big-ticket items.”

“Though some economists worry that too many people are overextending themselves, the boating industry considers itself lucky that business is humming despite high gasoline prices.” Well, I bet they feel lucky.

My Suze Orman impression is appropriate at this point, “Folks, listen up!” What is wrong with this picture? If David Yates couldn’t afford to buy a boat before then can he really afford to by one now? Yes, millions of people in California have profited from the value of their homes over the last several years, but do these people realize that they are spending their equity on liabilities – anything that doesn’t appreciate with time. Unfortunately, a boat is like an automobile… as soon as you take it off the lot, it decreases in value.

The article also said that most people are buying these boats in “cash” with money pulled from their own. That’s really not cash. It’s money borrowed on an adjustable rate mortgage.

“Debt is not the problem,” Robert Kiyosaki says, “It’s what you buy with debt that can cause you problems.” If you’re going to pull equity out of your home then use it to buy assets. Not a liability that over time might sink like a boat.