When Will the RV Bubble Burst? It’s Looking Up!

When Will The RV Bubble Burst? Will Prices Fall Soon?

RV market trends tend to fluctuate according to the ebbs and flows of market demand. Given the significant RV boom that came with the COVID pandemic and the sudden increase in remote work, it is only typical that there could be a pop in the bubble after the boom.

An economic bubble occurs when the price of a good rises far above the item’s actual value. In the case of recreational vehicles (RVs), an economic bubble would occur when the price of RVs exceeds the RV’s actual value. The buyer demand is there, so the inflated price holds.

This bubble has occurred in the housing and automobile markets in recent years. During the same period, we’ve seen changes in virtually all categories of goods, partly due to the marketplace’s impacts and the economy’s effects from the pandemic.

Let’s look at the recent trends in RV sales and prices: January 2024.

• Total RV wholesale shipments up 11% year over year
• This includes a 27% increase in all towable travel trailers
• There was a 35% decrease in folding camping trailers
• Camper vans had a 27% decline in wholesale shipments
• Class C RVs had a 22% decrease

Looking a little further back at June 2023 compared to June 2022:

• Towable RVs saw a 48% drop in wholesale shipments in June 2023 compared to June 2022
• Type A Conventional RVs also saw a 48% drop during this period
• Class B RVs saw a 43% decrease during the June 2023 time period when compared to the previous June
• Class C RVs, on the other hand, had a much slimmer decrease of 8%

2024 projections look better than 2023.

2023 ended with a total of 313,200 wholesale units sold. 2024 wholesale projections move that number to an increased unit number of 334,700 to 365,500 units. This total would represent an 8.8 to 18.8 percent increase yearly from 2023 to 2024.

This is good news for the struggling small RV retailers fighting to stay open.

What Are the Causes of the RV Bubble Bursting?

The impact of the beginning of the COVID-19 pandemic in 2020 was substantial on the RV industry. Demand went through the roof as people turned to outdoor activities. Overall sales of RVs went way up, and the industry posted gains never seen before. High prices weren’t a deterrent for those ready to take to the open road instead of a monthly apartment rental payment.

Inflated RV prices and heightened demand led to a bubble that the RV market couldn’t contain. What goes up must come down, especially when there isn’t continuing consumer demand to sustain it. These factors interplayed to create unsustainable market conditions where the RV market currently stands.

Higher Fuel Costs. High Gas Prices = Less Traveling

High fuel prices aren’t always conducive to an RV lifestyle, but it doesn’t mean RVers must relinquish their passion for RV travel. While escalating fuel costs directly influence the affordability and attractiveness of the RV lifestyle, modifications can be made to combat those fuel costs:

• Vacation closer to home
• Purchase a more fuel-efficient RV model
• Shorter trips
• Stationary RV living
• RV eco-friendly modifications like solar power upgrades

Long-Term Market Dynamics

The long-term implications of sustained high fuel prices force the industry to respond to the challenge of combatting high fuel prices. Options such as offering more fuel-efficient RVs and reworking marketing strategies to focus on the benefits of RV travel despite higher operational costs are essential in the changing market.

Eco-friendly RV options that attract environmentally conscious and cost-aware consumers need to be on the radar of RV manufacturers to remain competitive in an ever-evolving market system.

What Higher Interest Rates Mean for the RV Market

Rising interest rates ultimately make RV purchases less affordable to those financing their RV purchase. This has a significant impact on the RV market. With rising interest rates, the cost of borrowing increases, which directly impacts the monthly payments for RV buyers relying on financing options. The increase in financing costs can lead to a decrease in buyer affordability.

As financing becomes less accessible (and more expensive), the threshold for accessing the RV lifestyle narrows. This narrowing sidelines potential buyers who would have been able to enter the market with lower interest rates. Lower accessibility = lower demand.

Discretionary categories like recreational vehicles typically see increased consumer caution during economic downturns, inflation increases, and interest rate spikes. Not only are discretionary purchases like RVs an extra expense, but the overall cost of living associated with those economic shifts also influences consumers to reprioritize spending.

The Pandemic’s Impact on RV Supply & Demand

The global pandemic fundamentally shifted the landscape of travel and leisure. This led to a sharp rise in consumer demand for RVs, partly due to international travel restrictions and changing travel preferences as travelers switched from flying to driving. Many people turned to RVs as a viable alternative to fulfill their wanderlust while adhering to social distancing requirements.

This high demand spiked at US RV dealerships due to Americans’ need for a sense of freedom and safety that was no longer available with traditional travel. Like many things at the height of Covid-19, consumer demand outstripped supply. This resulted in RV dealerships reporting record sales and inevitable inventory shortages. Supply chain issues that arose during the pandemic heightened this shortage.

The shortage in supply and increase in demand led to increased RV prices. Reuters reported in July 2023 that ‘there’s definitely a recession in RVs,’ with current sales being the lowest since 2015.

RV Sales: Is It a Good Time To Buy an RV?

RV buyers should carefully consider multiple factors before purchasing an RV, new or used. While recent reports from the RV industry association president indicate that there will be an uptick in RV sales this year, the timing of purchasing an RV needs to be a personal decision.

Factors to consider: market value for both new RVS and those on the used RV market, high fuel costs, surge in demand, rising interest rates, and overall economic conditions. Couple those considerations with factoring in personal finances to make a highly informed decision.

Consider a pros and cons list weighing the increased cost of financing an RV against the benefits of owning one. Tallying projected expenses is an excellent way to visualize the costs associated with operating an RV instead of looking solely at the monthly payment stub without factoring in gas prices, campsite fees, insurance, and other costs associated with owning and maintaining one.

Don’t be afraid to wait for a fair deal, either by waiting for demand to decrease and prices to lower, negotiating on price or opting for a used model instead of a top-of-the-line new edition.

Keeping an eye on RV market projections can give you insight into the right time to enter the market.

Used RV Market

There is an ongoing interest in the used RV market, mainly driven by individuals and families looking to embrace the motor home life and, at the same time, control travel costs. The preowned RV market is an ideal entry point because of the lower financial requirement upfront. Additionally, the depreciation factor of used RVs shouldn’t be overlooked. New RVs lose value when they drive off the lot, which makes used RVs a solid option for budget-conscious travel enthusiasts ready to hit the open road.

As with all purchases, it is essential to consider additional costs that come with the RV lifestyle when budgeting for either a full-time or part-time RV life on the used market. Many newer models are available that are just as good as RVs newly arriving on the RV lot.

New RV Market

The new RV market is booming with diversification in the types of recreational vehicles available and sought after by consumers. With this evolution of product offerings is the increasingly popular camper van. RV manufacturers are responding to customer demands for more fuel-efficient options and designs that maximize space and usability.

RV manufacturers continue to listen to market demand to diversify their offerings from luxurious Class A motorhomes to versatile Class B and even class C vehicles and RVs, including giant RVs and compact mini trailers. This is good news as Americans’ interest continues to look for alternatives to air travel and the high prices of other types of travel.

What About the RV Rental Industry?

The RV rental industry remains steady as RV popularity continues to excite travelers. Growing annually at just over 2%, the rental sector is one component of the RV space that remains solid. This trend is good news for the RV makers able to keep their wholesale RV shipments steady despite a decrease in people buying when interest rates are elevated.

Renting over owning is an attractive opportunity in a market decline with a higher entry point than many travelers are willing or able to pay. This gives individuals who haven’t experienced the RV lifestyle an opportunity to try out the RV community before they invest money in purchasing their recreational vehicle.

The increased demand for newer models of rental RVs will play a significant role in the overall expansion of the RV market, encouraging manufacturers to innovate and produce units that cater to travelers’ evolving preferences. This is good news for RV popularity and the never-ending turns of the RV market.

The pros of renting vs buying an RV are simple:

• No ongoing monthly payment or interest
• No recurring monthly insurance payment
• No storage costs
• No maintenance costs

The cons of renting an RV vs buying an RV:

• Inconvenient; need to repack and restock the essentials with each trip
• Lack of personalization
• Doesn’t ‘feel’ like a second home on wheels
• Limited availability and can’t just go on a whim

Is It a Good Time To Sell an RV?

Determining whether it is a good time to sell an RV depends on the nuances of the current market conditions and a seller’s perspective. What is a good time for one seller might not be a good time for another.

In periods of high inflation and a fervent RV craze like we’ve seen in recent years, the landscape for selling RVs, particularly class B motorhomes, can be favorable. Additionally, when interest rates are higher, more people seeking to get into the RV lifestyle are likely to favor a lower price point of market entry, which is possible with a used RV purchase. Private sellers can benefit from this by commanding top dollar on the valuation of their specific RV model.

Before listing an RV for sale, sellers should consider a few key factors:

• Current level of demand
• Availability of similar models on the market
• Condition of their RV
• Features of their RV
• Pricing at dealerships of similar new RVs

Ultimately, the decision to sell should balance the potential impact of current market trends against the seller’s circumstances and goals. By doing this, a seller can leverage periods of increased demand to achieve the best possible outcome.

What Is the Outlook for the RV Industry? Did the RV Bubble Burst?

Numbers from the last few years indicate that yes, the RV bubble burst. RV sales were at their height in 2020 and 2021 and then started dropping off due to factors including loosening pandemic travel restrictions, increased interest rates, and fear of recession.

The latest RV shipment forecast bodes well as overall sales creep back up. RV owners aren’t going anywhere, and as consumer confidence increases and buying power increase, RVs will continue to be a driving force in the outdoor adventure travel industry.

It is important to note that economic factors will continue to shape the future of the RV market, with ebbs and flows in sales numbers as factors like gas prices, inflation, and interest rates impact the market. This is good to keep in mind for buyers or sellers who plan to enter the market, upgrade, or sell their recreational vehicles.

The RV market isn’t going anywhere, but keeping an eye on changes in the RV sales marketplace, keeping in mind upcoming recessions, and planning for inevitable ebbs and flows in the market are ideal things to keep in mind before purchasing an RV.