Sit down and buckle up

As of this writing in June, it appears that demand may be flattening a bit while prices continue to rise more slowly. What a ride it has been, with buyers sometimes offering tens of thousands of dollars more than asking price the first day a house is listed—while skipping home inspections.

We’ve seen many parallels in the red-hot airplane market, although demand there still is on the rise, according to the June Market Trend Report from Jason Zilberbrand, president of Vref. The runup in aircraft values over the past couple of years has been spectacular—great if you’re selling, disappointing if you’re buying.

We tend to look at these things through our own lens. Here’s my example: In 1999 I sold my 1977 Cessna 172N for about $43,000. At 22 years old, it had about 2,100 hours on it—the engine beyond TBO and with none of the improvements usually done to what for some was the cantankerous Lycoming O-320-H2AD. This engine was running great without the mods. Today, 23 years later, that same airplane—now 45 years old—is valued at $131,670—three and a half times what it sold for more than two decades ago and now with an average of 7,160 hours on the airframe. That June number is 15.5 percent higher than the previous quarter. The current value is 438 percent higher than what it sold for new in 1977, $30,050, according to Vref data. By the way, AOPA members have exclusive access to a Vref aircraft valuation tool on the AOPA website.

While the pandemic caused jitters to many parts of the economy, the GA market has risen wildly in the past two years. It is mostly a lack of supply that is keeping things from going even higher. At this point, even the high price of avgas—averaging $6.69 a gallon—has not yet caused a marked decrease in activity levels, although it has sparked plenty of debate in online forums and hangars. GA pilots seems to be continuing to fly in the face of avgas increases and even with the uncertainty about the future availability of avgas caused by questions about leaded fuel.

Without a doubt, the increasing hull values and lack of supply has created an interesting and complicated market dynamic.

For example, in June fewer than 2 percent of the Cessna Citation CJ3s in the fleet were on the market, much lower than normal. As a result, they were selling above asking price. And, because of those high prices and lack of availability, buyers were turning to other entry-level turbine airplanes, driving up the values of Beech King Airs and Pilatus PC-12s, for example. Pundits have been attempting to write off the relevance of twin turboprops such as the venerable King Air for at least two decades. Guess what? They’re still wrong. King Air B200 values were up 25 percent since the first quarter of the year, according to Zilberbrand.

And not long ago, people were writing off piston twins because of high fuel and maintenance costs compared to capable singles, such as the Cirrus SR22 and Beechcraft A36 Bonanza. Beech Baron 55 and 58 models saw significant increases across the board in the second quarter, often seeing five-digit increases in value.

The dearth of new Bonanzas and hard-to-get Cirrus SR22s has caused buyers to consider Columbia 300s, 350s, and 400s, driving their values up some 40 percent from the first quarter of the year, Vref reports. Zilberbrand notes that Diamond Aircraft are also big sellers “The DA62 is almost impossible to find, with only one aircraft listed for sale at the time of this writing.”

AOPA Aviation Finance reports buyers are pre-qualified for loans, but are frustrated by a lack of quality aircraft to buy.

As we saw in the housing market, the “fast-paced, frenzied market” is causing some aircraft buyers to skip important steps, such as pre-purchase inspections. “While I continue to hear this issue being brought up in many deals, it would be wise to resist,” Zilberbrand advises. “It is better to walk away from a potentially harmful deal than try and unwind it after you own it.”

In other words, buyer beware! Many of the quality airplanes have already changed hands recently, so at least some of the airplanes out there now may be dressed-up hangar queens (see “For the Fun of It” p. 58). Nothing wrong with that as long as you know what you are getting and the price reflects that. But if you’re thinking of fixing up one of those hangar queens, be cautious of the supply chain issues in aviation. New and overhauled engines and cylinders are extremely difficult to get. Avionics are often backordered. Even oil filters are backordered by months. Some pilots have resorted to reusing oil filters. As previously noted, it’s a complicated market out there. Buckle your seatbelts.