Every January, collector car market-watchers focus their attention on Scottsdale, Ariz., where thousands of cars are offered for sale at no reserve. Rightly or wrongly, the week is credited with setting the tone for the entire year, and 2016’s Arizona Auction Week carried a tension we haven’t seen since perhaps 2009. Would numbers be down? If so, by how much? And what does it mean for the market overall?
The quick answers to these questions are: yes, a bit and we will have to wait and see. Overall figures fell by 15% from last year despite the fact that more vehicles were both offered and sold. As a result, the average sale price slipped by 13%. At each venue, bidding was generally slower, dollars were harder to come by and buyers seemed cautious.
Of course, there is more to the story than the numbers alone. At the top end of the market, all of the star cars sold for expected amounts, but there were fewer such cars this year than in years past. For example, in 2015 the top 10 sales for the week accounted for nearly $53M and included a Ferrari 250 LM, a competition Ferrari 275 GTB, a Ferrari Superamerica, Carroll Shelby’s Super Snake Cobra, and the GM Futurliner. In all, six lots sold for $4M or more last year. By contrast, this year’s top 10 totaled approximately $37M with only two lots exceeding the $4M mark. RM Sotheby’s Mercedes-Benz 540K became the most expensive car ever sold during Arizona auction week at $9.9M including buyer’s premium, but car sellers had more options than ever for where to sell their car this winter (New York, Paris, Amelia Island, etc.).
Another key factor is that skyrocketing prices over the past three years for certain models have elevated attention and brought more cars to market. As a result, there was an oversupply in Arizona for many models. Case in point: The number of 1963-73 Porsche 911s went up by 66% this year from last, and their average sale price dropped by 20%. The number of Ford GTs doubled from last year and prices dropped by 8%.
Furthermore, most of those abundant cars were of average quality rather than being in top condition like most of the recent high-profile sales. A number of long-time buyers in Scottsdale noted that the overall condition of the cars on offer was slightly lower than in recent years, which would expectedly shift values lower.
Of course, some cars are simply finding new footing on the heels of massive gains. Production Ferraris from 1960-74 — easily one of the brightest spots in the market of the last 5 years — have seemingly leveled off. Values in Hagerty Price Guide saw minimal movement in 2015, so this isn't unexpected. Slightly fewer were offered in Scottsdale this year (32 vs. 37), which was an indicator in itself, and many more went unsold (16 vs. 11). Dinos in particular saw a decline, with average prices dropping by 17%. Mercedes-Benz 300SLs, Toyota 2000GTs and Ferrari 512 BBs all saw their numbers slip this week, too, in some cases back to levels that were last seen in 2012-2013.
Beyond the above factors, there are myriad reasons to speculate about. It is a presidential year and it isn’t unusual for people to tighten their spending as they wonder what will happen with the overall economy and their taxes personally. The global economy is slumping, oil prices are down, foreign currencies are weak, etc., etc. It seems there is enough economic uncertainty to restrain bidders.
The obvious question is what is the longer term effect of lower sales in Arizona? Sellers’ expectations will adjust and prices will likely relax as people realize that 20%-30% YOY growth (or more) isn’t a given across the board anymore. We don’t expect any drastic corrections. Although some prices are down, they haven’t retreated immensely. Most likely, if prices decline, owners will opt to hold their cars. Supply will decline and things should equalize.
Furthermore, there were still bright spots in Arizona. Late model exotics and interesting cars from the 1980s and later continued to excel. This held true across different price brackets. Bandit Era Pontiac Firebird Trans Ams and first generation Chevrolet K5 Blazers also did well. Overall the “nostalgia cars” from the middle of the market are healthy.
And don't forget that the numbers out of Florida the week prior to the Arizona auctions were remarkably strong. Top tier muscle performed well at Mecum’s Kissimmee sale; overall sales soared by 30% and average prices climbed by 20%. When all is considered for the month, sales in January 2016 were 7% below January 2015 and the average sale price is down 9% which is significantly sunnier than how some will try to spin the Scottsdale numbers.
Globally, a similar story is emerging. The first big series of sales to follow Arizona happened in Paris, Feb. 4-6. Three auction companies conducted sales alongside Retromobile festivities, and a near-record price was paid for a 1957 Ferrari 335 S Scaglietti Spider — Artcurial sold it for $35.7 million. Overall numbers were down only slightly (by 4%) and are as much the result of fewer cars selling than any massive shift in the market.
Any way you interpret the numbers, however, it seems clear that the pause in the market we have been waiting for has set in. The big question is how long this pause will last.