Are we in for a crash?

Matt Monson · 08-09-2018, 05:42 AM

Up front I want to say I don’t want this to be a PARF thread. As a manufacturer who is already being impacted by it, I have strong opinions on the tariffs but don’t want to talk policy. I want to talk price. Do people think we might be in for a classic car market contraction due to this stuff?

https://www.google.com/amp/s/www.cbsnews.com/amp/news/the-classic-car-industry-braces-for-a-trump-tariff-crash/

Macroni · Macroni's Garage

I view true collectible cars (550s) as a solid long term investment or asset.

IMO, what most of us have here will be impacted by monetary policy such as tariff, currency valuation or interest rate adjustments. They are much more sensitive to supply and demand curves than the exclusive.

Mocker · 08-09-2018, 06:20 AM

We are mere months away from entering the longest economic recovery in modern US history. The laws of supply and demand have not yet been repealed; economies are cyclical.

So yes, we are heading towards a recession--not this year, not next (probably), but by 2020 it's going to happen.

Macroni · Macroni's Garage

Jeez Mocker...… Harsh my mellow...….

SalParadise · 08-09-2018, 06:35 AM

The people who use URO parts exclusively for their restos are gonna take a huge hit.

With that said, I cannot wait until Porsche parts production is brought back to Detroit. They always made the best master cylinders and P/Cs.

Luckily there are warehouses and warehouses full of new and used parts for most any car already here. When those run out, well, I guess we'll pay.

Matt Monson · 08-09-2018, 06:35 AM

Quote:

Originally Posted by Mocker

We are mere months away from entering the longest economic recovery in modern US history. The laws of supply and demand have not yet been repealed; economies are cyclical.

So yes, we are heading towards a recession--not this year, not next (probably), but by 2020 it's going to happen.

The WTO has estimated a4-6% contraction of the world economy in the next 18 months. But I’m not talking about that. Recession will hit classic cars.

I’m talking about the classic car market specifically in the next 6-12 mo. I’ll be interested to see what happens at Pebble Beach. It already appears that the market doesn’t have the velocity it had a year or two back. The feeding frenzy is over even though prices have been fairly stable. There are currently over a dozen 3.2 Carrras for sale here that have been up a week or more. That wasn’t happening last year.

SalParadise · 08-09-2018, 06:38 AM

Quote:

Originally Posted by Matt Monson

I’m talking about the classic car market specifically in the next 6-12 mo. I’ll be interested to see what happens at Pebble Beach. It already appears that the market doesn’t have the velocity it had a year or two back. The feeding frenzy is over even though prices have been fairly stable. There are currently over a dozen 3.2 Carrras for sale here that have been up a week or more. That wasn’t happening last year.

I don't know if it's the economy or not. People get sick of stuff and sick of hobbies and move on. August is not the best month to sell because people are on vacation, getting back to school, paying for clothes and supplies, and there is no time to spare.

techweenie · techweenie's Garage

Judging by recent history, the 'collector class' will be unaffected. Midrange and project cars could soften.

Right now, there seems to be a surge of cars available 'at the top.' $500K+ cars I know of (or represent) for sale currently: two RS 2.7s, 550, 906 and a massive muscle car collection. I don't think this means people are bailing because of an upcoming recession... could be wrong.

Matt Monson · 08-09-2018, 06:42 AM

Quote:

Originally Posted by SalParadise

I don't know if it's the economy or not. People get sick of stuff and sick of hobbies and move on. August is not the best month to sell because people are on vacation, getting back to school, paying for clothes and supplies, and there is no time to spare.

The economy is not the market. One can have a slow market for something in a hot economy.

Matt Monson · 08-09-2018, 06:46 AM

Quote:

Originally Posted by techweenie

Judging by recent history, the 'collector class' will be unaffected. Midrange and project cars could soften.

Right now, there seems to be a surge of cars available 'at the top.' $500K+ cars I know of (or represent) for sale currently: two RS 2.7s, 550, 906 and a massive muscle car collection. I don't think this means people are bailing because of an upcoming recession... could be wrong.

The article says nothing about an upcoming recession. Recession isn’t the premise, cost is.

techweenie · techweenie's Garage

Quote:

Originally Posted by Matt Monson

The article says nothing about an upcoming recession. Recession isn’t the premise, cost is.

A price crash is only going to come with a recession, IMO.

SalParadise · 08-09-2018, 06:49 AM

Quote:

Originally Posted by Matt Monson

The economy is not the market. One can have a slow market for something in a hot economy.

You could replace the word economy with the word market and I would still feel the same. People get tired of tracking down old dream cars, paying top prices, always having a case of cash on hand to beat other people, then on top of this paying someone else to work on it because the are in their 40s and 50s and don't know how to work on a car - at all. People find other things to get involved in.

The market was so ridiculously flooded and overpriced I believe people are feeling burned out by it. Like I said August is not a great month to sell. People are busy. It may pick up but maybe people have realized it much, much easier to put the money down on a new Cayman or a new BMW or Tesla and be done with it.

Interest comes in cycles too. It's not just the market and economy or money - people lose interest.

As far as these tariffs, there is a ton of stuff here. I don't know how many people are importing old 911s from Europe. I think there is becoming a little less interest.

Macroni · Macroni's Garage

The true wealthy are rarely impacted by any economic swings. It is the speculators that get hit...…..

Matt Monson · 08-09-2018, 06:58 AM

Quote:

Originally Posted by techweenie

A price crash is only going to come with a recession, IMO.

I agree. The part of that article I don't buy is the idea it will have much impact at the top. I honestly don't think a guy shopping for a million dollar car is going to freak over paying $1.25m. But even more than that I think that if anything it will just create a more isolated market. Unless it's that super special one of a kind, people will just buy cars already stateside. It's also kind of vague about whether they would in fact actually tax used cars. I kind of think the author was spinning a bit and left out that detail. I haven't checked to see what the actual tariff thinking is.

Where I do think the impact will be very real is on projects and restorations. It's the parts prices that are going to change. But again, I am not convinced it's going to hurt market value. For years we had all these $10k SCs needing $10k engine rebuilds. Eventually enough people sucked it up, spent the money, and now we have a market where original and nicely tended SCs are $30-40k cars. Logic would say that if restoring one goes up by 20% they would stay or increase in value.

But a project, that needs a restoration, is different. Now instead of $50k to go through the car it's $60k. People might not be willing to finish the job. And when they sell projects buyers are going to look to what a finished one is worth and buy the project according to what it will cost to finish. I think condition 3- and 4 cars could go down while 3+ or 2s will possibly even go up a bit.

Matt Monson · 08-09-2018, 07:05 AM

Quote:

Originally Posted by SalParadise

You could replace the word economy with the word market and I would still feel the same.

Here, I will cut up the quote this time so you don't get confused. You may feel the same way, but a market and the economy are not the same thing. I wasn't refuting anything else you said just because I quoted it.

aschen · 08-09-2018, 07:14 AM

I think the answer is yes, though maybe not in as short term as the given time-frame. It seems probable even if you ignore externalites, and just look at the post recession increases in prices for interesting cars.

Feels like a bunch of rich guys playing expensive car hot potatoes at the top of the market. Normal people cant really afford the nicer cars in the middle that should seemingly be more moderately priced: e30 m3, 964s, lower level ferraris etc

1979-930 · 1979-930's Garage

The tariffs are only for incoming parts and cars. This will put a sting on the hobbyists ability to complete a car. If people start dumping projects, due to lack of funds, then prices on those may come down.
If the cost to complete a project goes up and I have a completed car for sale; Is't my car is worth more instead of less?

I don't know about the million dollar car market. Just find one here. If it's that rare of a car and it has to come from overseas it's probably worth the extra hit.
But I always hear that the cars are leaving the US more than coming into it due to the weak dollar. If these tariffs hurt our economy then more cars will probably leave. It will be 2009/10 all over again.

specialtyoneinc · 08-09-2018, 07:55 AM

I'm interested to see what the whales do at Monterey Car Week. If sales #s on the upper tier cars start to noticeably soften, it will naturally drag the lower tier collector cars down with it. Cars aren't a safe haven since they have had massive volatility in the past.

Some serious cars are on the block in Monterey this year.
https://www.maxim.com/rides/top-5-classic-cars-at-monterey-car-week-auctions-2018-8

Matt Monson · 08-09-2018, 08:54 AM

It was only a couple weeks ago that Reuters article calling 6 and 7 figure cars a good investment came out. My gut is the CBS article had political bias trying to come up with reasons the tariffs are bad. I am interested to see the coming auctions as a reality check to their assertions.

Mocker · 08-09-2018, 10:11 AM

If the current tit-for-tat tariff situation escalates to include new cars, the recession will come much sooner. A huge chunk of the US economy is tied up in the auto industry, its suppliers and downstream related businesses.

Every recent downturn in the classic car market over the past three decades has been in tandem with a US recession. Yes, rich people will feel that hit too--most of their money is tied up in the stock market, and when that tanks with the economy, their wealth takes a nosedive as well.

In this respect classic cars are no different than other luxury goods.