For the past decade, we've been watching the price of real estate escalate, seemingly without an end in sight. Some houses seem to double every decade, and, despite the increases, there appears to be no shortage of eager, willing buyers.
So why are we so surprised when GT350s, worth $50,000 five years ago, routinely sell for $200,000? Or when Z/28s, worth $35,000 in 2003, go for $100,000?
A great deal of the increase in values is due to the fact that many collectors buying today were not in the hobby five years ago. They don't have the historical perspective of what these cars were once worth; they only know what they are trading for today.
In any field of collecting, when a new market segment gains notoriety, prices generally escalate dramatically. When the art market decided, in 2003, to discover the 1980s work of neo-expressionist painters like Anselm Kiefer, Julian Schnabel, and Eric Fischl, prices of their works soared. In Portland, when the downtown area called "The Pearl District" gained cachet with young professionals, the area went from undesirable to ultra-hot in less than five years. Gentrified Portlanders didn't sell their 5,000-sq-ft homes and move downtown; rather, upwardly mobile 30- and 40-year-olds decided that condos downtown were suddenly worth more per square foot than traditional housing. And so they jumped in, regardless of how high the prices were by traditional standards.
WHAT IT COSTS TODAY IS WHAT COUNTS
Barrett-Jackson has introduced a new wave of buyers to the collector car market. In the past three years, over 10,000 first-time bidders have registered at B-J.
When these new buyers hear that 1967 427/435 Corvette prices have doubled in the past three years, they don't respond with concerns about bubbles and crazes. Rather, through their eyes, if these prices have doubled, then they are primed to double again. They don't care what the old prices were, they just know what they'll have to pay to get into the game today.
Rarely do collectors think they are buying at the peak. So these new buyers, in a self-fulfilling prophecy, continue to buy at ever-higher prices, driving the entire market forward.
Will this meteoric rise ever end? Of course, as nothing lasts forever. And the undeniable edge that real estate has over collectibles, of any kind, is that people will always need to have roofs over their heads. No one "needs" a Hemi 'Cuda or a Warhol Campbell's Soup Can painting.
But even when the market goes through a decline, the cars with the best history, in the best condition, will always retain the largest percentage of their value.
What this all ads up to is that the market is likely to continue to be volatile for another couple of years. I believe the doubling and redoubling of values phase is over, but we can expect 20% per year rises through 2009.
Which means that it's not a bad time to buy, even at today's full retail, especially if you can buy an excellent example. For instance, brilliant Daytonas are edging past $250,000, and there's no reason they shouldn't be at $300,000 in another year.
And when they fall, as they eventually will, they won't sink to $85,000 as they did in 1991. I would expect a drop to $150,000, partly because costs of restoration and replacement continue to rise dramatically. Further, the number of those with means to buy expensive toys continues to increase.
SPRINGTIME FOR SPORTS CARS
In the Pacific Northwest, we have endured one of the wettest winters on record, with rainfall at 50% above the already drenching historical norm. But now temperatures are edging back into the 50s, and skies sometimes have more blue than sullen gray.
Which means it's time to get the SCM fleet ready for another season of high times on back roads. Here's a status report.
The SCM 1963 Split-Window Corvette is asking to be exercised. Despite Colin Comer's public outing of our 220-hp, pickup-sourced engine, the car still looks like the 327/340-hp machine it was born as, and the increased torque of the small-valve heads makes burning rubber around town a snap. The drivetrain and suspension are dialed in, and a recent rebuild of the steering box did wonders for straight-line stability. Next step is a set of decent tires to replace the outlet-mall specials currently installed, then we'll be set for summer. Except, of course, for the increasing pressure from SCM readers to spend $10,000 to build a date-code-correct, "restoration-restamp" numbers-matching 340-hp engine.
I drove our 1965 Giulia Spider Veloce today for the first time since December. After the Corvette, it felt diminutive and high strung, a pint-sized thoroughbred. The Home Depot light switch is still hanging from the dash, but my co-driver on the trip, Doug Hartman, tells me he has managed to resurrect the old one (a skill that will surely be lost on today's children). Jon Norman has sent new brake pads to replace the "fade 'r us" organic specials on the car, and Alan Blanchard at A&P Specialties installed a new thermostat (the water temperature still reads low, so I'll have to calibrate the needle using the setscrew in the rear of the gauge). He also installed ¾" spacers under the rear springs-the cut-down stock springs bottomed too easily when burdened with a passenger and luggage, i.e., four cases of wine. The timing needs to be retarded slightly so the Alfa will idle better, but other than that, it's set to go. The cosmetic needs it has will stay just that-needs.
As you might expect, the '78 911SC has required little, just a new alternator at $500. The more I drive it, the more I find the ride to be uncomfortably stiff. Our Porsche guru, Jim Schrager, has recommend replacing the 16" Fuchs with a 15" Euro wheel and tire setup for a more reasonable ride. Naturally, SC purists, gleefully led by SCM legal analyst John Draneas, have already started using the words "wimp" and "soft-bottom" when they refer to me, but it would be nice to go for a drive without having to pick my fillings off the floor when it is over. If you've got a set of 7" and 8" Fuchs or, dare we say it, replicas that you'd like to sell, contact me at [email protected].
Finally, our '68 2002 is still sitting, driveline out, in Los Angeles. I fear it has fallen into the black hole of "mechanic-neglectus," and hope that we don't have to bring it home in pieces. Buying this car was supposed to be fun; so far it has been nothing but bad surprises and disappointments.
But without the challenges that are intrinsic to old cars, we wouldn't experience the exhilaration on those days when they actually run properly. That is to say, when they are nearly able to keep up with a five-year-old Honda Accord.