2 March 2009

Steady As She Goes

While the collector car hobby witnessed its own reckoning in 2008, many aspects of the hobby are solid.

In hindsight, 2008 may eventually be looked upon as a page-turning year for the collector car hobby. But not simply because the news on the value front was no longer the “onward and upward” that the market has come to expect over the last six or seven years. While there was a fair amount of hand-wringing over values – especially in the latter half of the year – there were other subtle changes in the hobby that may indicate a maturing process.

Economic impact

The summer of 2006 saw the first drop in housing prices in 11 years. However, there was far worse to come, as the subprime mortgage market began to collapse, followed by the stock market in October 2008. Those who had prospered building mortgage, plumbing, electrical contracting and landscaping businesses during the housing boom were suddenly far more concerned with the survival of their companies than battling for the right to take home a pristine AAR ’Cuda. For those who saw a correction in the muscle-car market as inevitable, the downturn in the housing market provided a reason for one.

The first cars to really take it on the chin were the clones and the undocumented or non-original muscle cars, which almost immediately lost as much as one-third their value. According to the Hagerty’s Cars That Matter price guide, for most of 2007, the blue-chip muscle cars held their own, but by early 2008, when the full extent of the subprime mortgage meltdown became clear, even excellent examples of iconic muscle cars, such as the Shelby GT500 and Chevelle SS LS6, were down measurably in value. The long-talked-about correction had come to this sector of the market.

According to Colin Comer, author of Million Dollar Muscle Cars, the biggest losers were anything with a Hemi in it. “With up to 500-percent appreciation in four or five years, these cars had been whipped into a frenzy that just couldn’t be sustained,” he says. “They’re down to around 2003-2004 prices.”

But excluding Hemi Mopars, muscle cars with production numbers less than 1,000 weren’t really hurt. “Overall, prices are down to perhaps 2005 or mid-boom levels,” Comer says. So this was nothing like the crash seen by the Ferrari market in 1991.

Other sectors of the market – such as brass-era cars, European sports cars and prewar classics – have been less affected by the economic downturn. For most of 2008, a strong pound and euro ensured more of a soft landing for cars with worldwide appeal. Muscle cars, which lack an international following, simply weren’t as lucky.

David Gooding, founder and CEO of Gooding & Company, noted that more than 25 percent of the bidders at his Pebble Beach sale in August 2008 were European. In any event, the dollar’s strengthening against the euro at the end of 2008 makes it an open question as to how many Europeans will make the trip back to Pebble Beach in 2009.

Auction houses also noted a trend toward increasingly discriminate buyers. According to Ian Kelleher, RM Auctions president and COO, buyers in 2008 were playing it safe and paying much more attention to quality. True No. 1 and No. 2 examples of rare and significant cars generally had little trouble finding takers at strong prices, but more common cars, those with stories or those in lesser condition were tougher sales. “One thing hasn’t changed – the auction business is still about timing, venue, cars and clients,” Kelleher says.

In the latter half of 2008, many potential buyers also seemed to be sitting on their hands waiting to see how bad things were actually going to get with the economy and the outcome of the presidential election. The concern with the latter was that the new Obama administration would quickly raise the rate on capital gains taxes — a real concern for long-term owners of valuable cars.

Expanding areas

Unlike the U.S. economy, which officially entered a recession in 2008, there were some notable expansions in the collector car hobby: August Monterey sales were stronger last year than in 2007, with Gooding, RM, Bonhams and Russo and Steele all doing quite well.

Not surprisingly, Gooding – whose star has been steadily on the rise since its formation in 2004 – entered the Arizona market in January with a one-day sale held at an upscale Scottsdale shopping mall. The location was quite good – with the excellent access and ample parking one would expect of a retail center – and the Gooding team pulled off the first-year sale with characteristic aplomb.

Concurrent with the venerable Labor Day Kruse Auburn sale, the Worldwide Group held a new catalog sale just down the road. Rod Egan and John Kruse ably filled the demand for some higher-end cars and more attentive service.

In October, Barrett-Jackson brought its brand of flamboyant sales to what seemed like it should be the company’s ancestral home – Las Vegas. The results in attendance were impressive and, for the most part, the prices realized were market correct despite concerns over the economy.

Safe bets

One significant trend that continued to gather momentum in 2008 was the rise of the unrestored car. It is well known that altering or refinishing a well-preserved object is avoided in most other collecting pursuits. But until recently, in the old car world, it was common practice to restore the patina, originality and, some say, the charm out of well-preserved, but less-than-perfect, original cars.

Tom Cotter, co-chair of the Amelia Island Concours d’Elegance and author of the books The Cobra in the Barn and The Hemi in the Barn, says, “It’s sad how many cars with original finishes and bolts tightened by workers at the factory have been lost in pursuit of shiny and fresh. Honestly, my favorite car is my unrestored 1938 Ford Woodie. It’s reliable and has a cohesive feel that restored cars just can’t match. It not just a disparate collection of new parts.”

Signs of an increasing appreciation for originality are all over the old-car hobby: Last year, the Pebble Beach Concours d’Elegance added a postwar preservation class, and the Bloomington Gold organization of Corvette Survivor fame held what was likely the first all-makes car show open only to unrestored cars.

The market has shown some of the same reverence. Last year’s sale by RM of a completely original 1911 Oldsmobile seven-passenger touring car for $1.65 million was followed up by the February 2008 Paris sale of a 1961 Aston Martin DB4 – utterly original and with every document since new. The Aston sold for more than $450,000, again almost twice the low estimate.

Aston Martin expert and dealer Steve Serio sums it up best: “A car is only original once, and this is proof positive that a really savvy collector will pay much more for that than he or she would for a restored car. Anyone can own a restored trailer queen, but the very few great original cars that still exist are being coveted by educated buyers.”

The future

This year is shaping up to be volatile. All bets are off if the already teetering economy is further gut-punched by massive defaults on consumer credit or commercial real estate loans. Following the stock market collapse of 1987, more money flowed into intangibles, such as collector cars. If things stabilize in the near term, and credit eases up, we could see the same phenomenon again as people turn from a lethargic stock market.

On a demographic level, one simply has to look at auction and concours crowds to be concerned about the obvious graying of the hobby. Will anyone care about cars of the 1950s, ’60s and ’70s when this generation passes from the scene? Comer (himself a Generation Xer) says if history is any indication, yes.

“Gen Xers and beyond will likely look to cars from the 1950s and ’60s the same way that baby boomers have started to collect brass-era and prewar classics that they have no recollection of from their youth,” he says. With prices of dorm room poster icons like the Lamborghini Countach and Porsche 930 Turbo on the rise, it seems apparent that even though generational shifts occur, car collecting is a permanent part of the American psyche.
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To see this article in its original format, view the pdf version of the Spring 2009 issue of Hagerty magazine.

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