What's to blame for disappointing Monterey auction totals?

What's to blame for disappointing Monterey auction totals?

08/26/2019

A bit of a snafu created confusion which didn’t help the chances of the Type 64, and had a few more no-sales like it gone the other way we’d be looking at very different 2019 totals.

Even before the last hammer fell in Monterey last week, it was obvious that sales totals would be significantly lower than in 2018. 34 percent lower, according to Hagerty, with total sales amounting to $245 million compared to $370 million in 2018. That’s the second lowest total after 2011, which took place in a far gloomier economy.

What’s to blame for what looks like a spectacular drop?

A handful of major no-sales contributed. The debacle during the bidding for Ferdinand Porsche’s Type 64, which was expected to bring north of $20 million if it found a buyer, was the biggest single dud of the week, but even before the bidding snafu its chances of finding a buyer were… not that great actually. In addition to the Type 64, Dana Mecum’s 1959 Ferrari 250 Monza went unsold at $20 million — word is Mecum was looking for a couple million more.

But can these one-off, headliner lots that would typically generate north of $10 million always be treated as the best indicators of market appetite? There have been plenty of sales north of $10 million in what were otherwise very weak, recession-ridden years. And considering the 2018 totals in a vacuum, it’s helpful to remember that $48.4 million of the 2018 Monterey totals came from one car: a 1962 Ferrari 250 GTO that also set a record for the highest price for a car paid at auction in the process. Had that sale not happened last year and the Type 64 and Monza actually found buyers this year, perhaps we’d be looking at a very different picture of 2019 as Hagerty suggests.

Still, a few notable milestones were reached this year, including a world record auction price for a McLaren F1 when an LM-spec F1 brought $19,805,000. It wasn’t lost on the crowds in Monterey that a 1990s supercar brought this money — it wasn’t an over-restored concours frequent flier from the 1930s or the 1960s. Supercars of the 1980s and 1990s have certainly been in the spotlight for much of the past five years, which has helped propel the values of at least some of them, like the F1, into the stratosphere.

So it’s best to dig a little deeper in measuring just how 2019 was different.

For starters, the sell through rate was 58 percent compared to 62 — not a big drop in itself — but the average selling price was also down by a big margin. In 2019 it was $319,610, representing a drop of 36.7 percent. That’s perhaps one of the most telling metrics of 2019. The median price, meanwhile, dropped to $24,200 from $29,700, or 22.7 percent compared to 2018. If there was a silver lining in 2019 it’s that lower-priced cars, hammering for under $50,000, saw some gains in a number of categories.

Rounding up the usual suspects isn’t difficult given the somewhat cyclical nature of the collector market, but there were also plenty of red flags going into the Monterey week auctions

First of all, it didn’t help matters that about a week prior to the auctions the stock market saw its biggest drop of the year, cementing fears that the current economy has already seen its peak and that the only way to go was down. Indeed, for much of the past 24 months there have been fears that the economic recovery was not only running out of steam, but that a recession inevitably lay ahead in the not too distant future. Economic jitters were certainly in the background in Monterey this year, even among a crowd often seen as isolated from economic jitters. But their reasoning wasn’t driven by what’s happening now: buyers who are looking to flip cars two, three or five years in the future are likely not expecting the market to be as strong as now, triggering a decision to sit still rather than to buy. If the collectors who rotate their cars frequently are thinking that they won’t be able to get their money back or make a profit in a few years, then there isn’t much point in buying.

Second, are the interests of potential buyers shifting so quickly that sellers aren’t offering what’s actually in demand? That’s a possibility as a generational shift has been going on for the better part of this decade, but it’s happening so slowly that it’s difficult to see the big picture at times. Muscle cars have arguably seen their peak — the values of classic muscle have been declining for a decade after a few particularly exuberant years at the start of the century that now seem a little silly. The Monterey auctions have distanced themselves from the muscle car craze that has seen its grip on Arizona in January begin to slip in recent years, but we’ve yet to see a massive sell-off of muscle cars whose buyers overpaid for them prior to 2008.

The third very obvious suspect, once again, is that the cars on the covers of the catalogs simply did not find buyers this year, just like the Type 64 did not, and this has depressed overall totals. Hagerty notes that the sell-through rate for seven- and eight-figure cars in 2019 was just 42 percent, down from 56 percent a year ago. A few big duds can cause a big dent in the entire week, which is what appeared to happen this month. In addition to the no-sale of the Monza that reached $20 million, Hagerty notes that a SWB 1962 Ferrari 250 California Spider was bid up to $9.4 million, which was a bit south of what the seller was looking for. That’s another big ticket item that could have helped paint a very different picture of 2019.


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