28 November 2012

The Connection Between Real Estate And Muscle Cars: Why now is the time to buy

As a whole, the collector car market weathered the economic downturn pretty well. In fact, collector cars in general are ahead of the stock market — which before backing off had come within 600 points of its all-time high reached during the summer of 2007. By comparison, most sectors of the collector car market are at or above where they were in 2007.

Notably absent from the above generalization are muscle cars, which took the biggest and most publicized hit during the dark days of 2009. High flying Chevelle LS6s plummeted in value by two-thirds in a few short months, as did seemingly anything with a Boss or Hemi motor. There were a number of reasons for this: First and foremost, real estate was at the headwaters of most of the money that flowed into the market. Whether it was money sourced from ballooning home equity or cash from a successful small business like a drywall contractor who morphed into a home builder during the real estate boom, the connection was undeniable.

The crash in the real estate market took the octane out of the tank of the muscle car market. Prices for big name muscle fell even harder and faster than Sunbelt housing. In other sectors of the car market, a strong Euro and a desire on the part of overseas investors to place as much money as possible into tangibles propped up other sectors of the blue chip collector car market. For the most part, though, these people were looking for Ferrari 250 SWBs, not Hemi ’Cudas. Muscle cars simply don’t trade in a global market the way Ferraris do.

Fast forward a few years and signs of a real estate recovery are everywhere. Median home prices have inched upward for the last seven consecutive months and are now 5.8 percent higher than they were a year and a half ago. New housing starts have also picked up during the past year, showing a 37 percent improvement. New hiring in residential home construction historically lags behind new housing starts, but even that benchmark has been stable for the past two years.If construction picks up and leads to more jobs and rising home prices, a lot of the pieces of the puzzle will be in place.

The fundamental questions are: Will former muscle car buyers be resilient and return to the market? Will rising home prices translate to disposable income that can be directed toward muscle cars? And ultimately, will muscle car prices return to boom-time levels, and if so, when?

Interestingly, muscle car prices are already on the rebound, so that to me indicates that the answers to the above are, at least in part, largely “yes.” Particularly for the baby boomer generation, to whom muscle cars appeal the most. Boomers were born between 1945 and 1964, and the oldest of them are not even 70 yet. They’re still in their prime collecting years and the youngest are just hitting their peak earning years and becoming empty nesters with fewer obligations and more disposable income.

Shelby GT350s that were $300,000-plus before the crash fell to as little as $150,000. They’re already mostly back. Yenko and COPO Camaros have exceeded prices from six years ago. Hemi Mopars and LS6 Chevelles, meanwhile, still have a way to go. Some of the small block cars of the Trans Am era like the AAR ’Cuda and Mark Donohue Javelins are appealing now, too. But the point is, the window is beginning to close on picking up some of these great cars up at a price point where they’re affordable and where there is an upside in the not-too-distant future.

While it may be five or even 10 years before the real estate market returns to full health, trend reporting always seems to lag behind what people on the ground are experiencing. If you wait until the mainstream media finally reports the return to full health of the real estate market, you will probably have waited far too long to pick up that Boss Mustang.

 

 

Muscle Car market

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