Untangling the Corvette Market Mystery Mess
In a few days two prophetic auctions will take place that collectors of Corvettes will want to keep their eyes on whether they plan to bid at these auctions or not. The two biggest sellers of collector Corvettes in the country, Mecum® and Barrett-Jackson® will be holding their second important collector auctions of 2014. The reason these auctions are important is because after some mixed and difficult to interpret first quarter Corvette auction results, we should get a better read on the Corvette collector market and where it is headed for this year. After a spectacular 2013 which saw new records set on “blue chip” Corvette prices, and while the Corvette segment of the collector market was strong for most rare and well optioned cars, at this point it is difficult determine whether last year’s strong market trends will continue for 2014.
Based on the mixed results of the first quarter auction events from the several auction houses, including the most important Corvette auction companies, Mecum® and Barrett-Jackson®, it has been difficult to predict whether the strength in the Corvette market will continue throughout 2014. In January, Barrett-Jackson® had their best Scottsdale auction in history and their sales results showed an overall sales increase in the high single digits. The Corvettes at Barrett-Jackson® were impressive and enthusiasts got to see a new world’s record price for a Corvette sold at auction when a 1967 L88 Corvette was sold for $3.85M, breaking a record set just a few months prior at Mecum’s Dallas auction of $3.52M by another 1967 L88 Corvette. At the same Barrett-Jackson® auction this year enthusiasts and bidders also witnessed another record was set for a third generation Corvette when the world famous L88 racecar, “The Rebel,” was sold for $2.86M. Normally when two Corvette world’s records are shattered in the same auction it would be a pretty good indicator that the market was definitely going to have another exceptional year ahead.
|A world's record price was paid for a C-3 at auction when "the Rebel" was hammered down for $2.5M at Barrett-Jackson in Scottsdale. (Photo source: Barrett-Jackson)|
But the results left the Corvette market with some serious questions. Could the disappointing results be attributed entirely to the external factors or was there a shift coming in the previously strong Corvette market? Analyzing the results, one important fact emerged, more than a few of the “blue chip” Corvettes did not sell in Kissimmee, and due to the heavy impact of these cars on the entire Corvette market those results raised a flag indicating a need to find answers and determine the actual direction the 2014 market was headed. Of the top ten most important, rare and important Corvettes, of the 400 consigned, seven did not sell. Though the weather and attendance may have influenced those results, normally the strongest “blue chip” collector cars are rarely affected by factors such as weather, since most serious, informed and qualified potential bidders have vetted the cars, developed bidding plans and contingencies for those investment lots well in advance of the actual auction. If the weather or some other external factor arises those bidders are usually prepared to place their bids by phone, fax, or computer. So if it wasn’t the drop in attendance and if the collector whales had their plans in place, what was it that kept the cars from changing hands, were the bids too low or were the reserves too high? Buyer’s reserves are something that the auction company has little control over and no auction company works harder to bring buyer and seller together than Mecum®. The next step is to determine whether the bids placed were realistic in light of the strong Corvette market up to that point and were the bids at least “fair market value.”
|Dana Mecum on the Block trying to bring the buyer and seller |
to an agreement. (Photo source: Mecum)
Below is a list of the top ten Corvettes and the selling price or the final bid price. For the purpose of determining the market direction we will ignore whether the car sold or not and look at the final bid price versus the fair market valuation of the car at the beginning of 2014.
Though the ’56 Corvette prototype and the 1963 Earl styling cars were disappointing that they did not sell, since they are unique cars they are difficult to consider in determining the health of the Corvette market. More importantly are the highly desired Z06’s and L88’s where there is considerable prior market data to help judge the quality of bids placed.
To help us in our analysis let’s look at only the cars in blue type since those are the cars for which we have some historic price data over time. One of the best market guides available for determining both historic and current market values for collector cars is the Hagerty Price Valuation Guide®. Hagerty® has compiled extensive data on the first four Corvette generations’ values over the last seven years based on the condition of the car and many of the the production RPO’s. You can find information here: http://www.hagerty.com/valuationtools/
The first thing which must be kept in mind is, with the exception of only a limited number of Corvettes with rare options, the vast majority of Corvettes, today, are not selling for the prices they were getting in 2007 according to Hagerty. Many of the strong optioned cars are getting close to their market highs but most average optioned Corvettes are still selling below what they were being sold for in 2006 and 2007/ The biggest reason is that 2007 was the last year prior to the stock market and corresponding collector car market crash of 2008. Two optioned Corvettes which are exceptions are the 1963 Z06’s and the 1967 through 1969 L88’s. Both of these optioned Corvettes are bringing considerable more on average than they did seven years ago. Even the rarer 1967 L89, of which there were only sixteen produced, is not bringing 2007 prices on average even though they have doubled their seven year low price of $217K . But the reality is that most Corvette enthusiasts are not buying $250K + cars even though we may want to. Most of us are buying the less rare but well to mid optioned and less costly cars. While most of those cars’ values are still on average below the 2007 prices, the top dollar “blue chip” Corvette sales performance has a ripple effect on most other Corvette prices. So, in short, blue chip prices impact the entire Corvette market, if not immediately, shortly thereafter.
One of the factors that have driven some rare optioned Corvette’s pricing to all time highs and helped them defy the trend for most of the Corvette market is the focus over the last several years with performance and racing optioned cars, especially those with documented heritages. As a result not only have the prices of Z06’s and L88’s escalated well above their seven year highs they have influenced prices on other high performance optioned cars, as seen in the values of the high horsepower big blocks as well as the LT1, ZR1 and ZR2’s, though bargains can occasionally still be found.
|This exceptional 1969 L88 sold $510K at Mecum's world's largest collector car auction in January. In Corvette L88 terms this could be considered a prudent buys. (Photo source: Mecum)|
So when the “blue chips” go up usually other Corvettes will follow almost in order of options and rarity. In other words values of high optioned performance based Corvettes will go up in a quicker time frame than the lower optioned and horsepower cars. And, though the overall Corvette market has been making a comeback towards meeting or exceeding their overall market highs of 2006 and 2007, at the end of 2013, mid and lower horsepower optioned Corvettes are still lagging well behind their highs and in many cases have shown little upside growth from their historic low prices. So much of the otherwise strong Corvette market in the last two years has come from the concours condition restored or survivor, well optioned, condition 1 and 2 cars with a bulletproof provenance and even better if they had a documented performance heritage. Various strong and weak examples can be seen In the “Affordable” chart below which illustrates that most examples are well above their “Market Low Value” but have not quite attained their value as of December 2006, and there is even an example of the current value being only $100 above the historic low value.
The fact that most Corvette prices have not yet attained their seven year highs is good news for collectors who still want to get in the market, but many optioned Caorvettes are now rapidly approaching those highs. Understanding this and the market direction adds some urgency to potential purchases if the market performs like it did in 2013. To give you a feel for some of those values here are some Hagerty® historic and current valuations of some of the most affordable first through fourth generation Corvettes all rated in a strong #2 condition. (Note these are averages and deviations to these valuations will occur.)
Over the past seven years Mecum’s Infonet® reports that eleven 1963 Z06’s have crossed the block since 2007. Four of the eleven 06’s were sold, four failed to meet reserve and three show no bids and no disposition. Sold prices ranged from a $250K bargain for a Nabers Brothers older restoration, from the Buddy Herin collection (the same consignor of the 1967 L88 which set a world’s record price of $3.5M at Mecum’s 2013 September Dallas event) to over $1M for the well documented historic Gulf Oil race car which sold in January of 2009. The chart below shows Hagerty’s historic valuation on number 1 condition “Blue Chip Corvettes,” of which the 1963 Z06’s and 1967 – 69 L88’s make up an important piece of the “blue chip” segment. (Note that the historic high price on all of these Corvettes is the current valuation and that all cars are significantly above their 2006 year end prices)
By analyzing the data in this format we get a better perspective of the “blue chip” segment of the Corvette market. Using this approach it appears that the bids placed on the investment Blue chip segment were at or above market valuation. This finding would support the theory that in many cases the reserves were set to maximize, if not over-estimate, the potential value of the consignment. Though this would support the theory that overall the current Corvette market appears healthy. However, that being said there may be some softening or stabilization in the C3 market segment. Of the seven C3 Corvettes on the lists, two were underbid/sold, three were sold above the current market value, and two were bid at market value. But the second generation blue chip segment appears exceptionally strong based on the five L88, Z06, and L89’s offered for sale. Every one of these cars were bid/sold above the current market evaluation, and most of those were substantially above the current values. Based on this the ripple effect of these high value, investment cars should positively impact well optioned other Corvettes, particularly the second generation cars.
But as previously noted, we should get a more definitive answer and 2014 market direction following the two auctions taking place later this week. Both auctions have some good examples of first, second and third generation Corvettes in every segment scheduled to cross the block and we will be watching, analyzing and reporting our findings. Both auctions have more than a few Corvettes that will help us decipher the market direction. You can learn more about the Mecum consignments at http://www.mecum.com/auctions/top_picks.cfm and the Barrett-Jackson Corvettes at http://www.barrett-jackson.com/palmbeach/ .
The Revenant's Auction Picks
Mecum's April Houston Auction 2014
Barrett-Jackson's April Palm Beach Auction 2014