Economics 101: The proof is in the Porsche

Economists tell us that when demand for goods drives up prices, the market will, in time, respond with an increased supply.

The collector car market, it turns out, adheres to that principle. Over the past three years, Porsche 911 prices have risen steadily, and in January’s Arizona auctions supply elasticity has increased. This year, 69 Porsche 911s in all the glorious diversity of the series, crossed the five main auctions blocks. Consider that just 41 were offered in Scottsdale in 2015, and a mere 19 in 2014. Clearly, supply expanded meeting demand.

As economists will also inform you, this response has consequences. Eleven of the 911s sold in Arizona this winter had previously been sold at auction, so their history was known. Of the 11, only five brought higher prices than in earlier sales (and two of those prior sales came before the run on 911s took hold).

Late-arriving speculators hoping to quickly cash in – seven of the 911s had been bought in 2015 – did not fare well. Only one brought a Scottsdale price higher than its last purchase, and that does not even factor costs like commissions, transportation to Arizona and entry fees. A few examples (prices include the buyer’s premium):

1989 911 Speedster: sold for $165,000 at Bonhams Quail Lodge auction in August, then brought just $154,000 at RM Sotheby’s Arizona.

1977 911S Targa: sold for $57,200 at Mecum Monterey in August, then went for $45,100 at Bonhams Scottsdale.

1971 911S Targa: sold for $140,400 at Mecum Monterey in August; it drew only $115,500 at Gooding Scottsdale.

1982 911SC 3.0: sold for $35,200 at Leake’s Dallas auction in September, but realized just $33,000 at Barrett-Jackson.

But the big loser was the 1989 911 Carrera Speedster that sold for $248,400 at Mecum’s Indy sale in May 2015, then brought just $181,500 at Barrett-Jackson in January.

There were some bright spots, but those were reserved to Porsches with longer holding periods. The time when a 911 could be flipped for enough profit to pay for the weekend’s lodging, car rental, meals and airfare is, if Scottsdale’s auctions are any indication, over.

Not the case with Porsche 356s, though. Built in much smaller quantities over a much shorter model lifetime, prices for this model remain healthy. It may be that 356 owners are more inclined to hold, drive and enjoy the cars than flip them for a quick profit. As a good example, a 1964 356 SC Cabriolet that last sold at auction by Gooding & Company at Scottsdale in 2012 for $137,500 brought $220,000 at the Bonhams sale this year.

For 911 owners hoping to profit from the current demand spike, it would seem that there’s mounting pressure to jump in quickly. Of course that will add even more supply and further test 911 price elasticity – basic economics at work.