599/430 Prices Crashing

The credit crunch is just starting to be priced into the market.
The other shoe to drop will be the global economic slowdown.
I believe we have a lot of downside to go.

 

Totally agree. What we've seen is mostly uncertainty and fear... fundamentals to follow. Nijiman.... at least you should be able to find a Murcie at a better price. Let us now what you end up getting and for what $ )

 

Nijimin, just wondering what you do for a living that leaves you confident enough in your early 30's to pull the trigger on a financed Fcar (while leaving you free to post on message boards afternoons) during a global economic meltdown?

 

He said a Lambo......LOL!

Those are different type of owners, IMO.....

Some of us have two (or more) screens open, so the Chat is just one of them........

 

Even worse!

 

yes, i have noticed the lambo forums have a different flavor. i hope to join that club soon.


last year, i bought my first ferrari, and it's just not doing it for me. i'm gonna keep it, because the value has gone to the toilet, but that's fine by me. i think it will just look better with a lambo next to it.


i am at work this afternoon, and right now i have 8 internet windows open.

 

Glad I'm not your employer!

 

It is amazing that there are still lots of folks who think the world has not changed. I posted on this board back in the fall of 2006 that there was a housing market crash coming and that it would have very serious repercussions for the economy. I knew it would be bad but what we are seeing now is the worst case scenario playing out.

I sold my Daytona in January, a decision that was gut wrenching. I loved that car. I miss it every day. But the bottom line is that it had increased in value almost 3 times, it was crystal clear that the housing market collapse was going to get worse and the economy was going to suffer at best a very deep recession and my business (I own a small mortgage company) was going to suffer badly. I am very glad I sold when I did.

I was a very active dealer in vintage sportscars back in 1988-1991. This crash is going to be worse. Back then, when the bottom fell out cars were simply not selling. It took a couple of years before folks who had bought at the top were willing to face reality and unload at a loss. This time around, the broader nature of the crash is going to force people to sell resulting in deeper price depreciation in a shorter time frame.

I disagree with Jim that we are near a bottom. Clearly we are closer than we were a month ago.... but I will not start selling my put options on banks, builders, REITs and high end retailers until the DOW tests 7500 at least.

All of the various and massive bailout packages have one thing in common: none have addressed the core of the problem which is housing prices. Paulson is focused on bailing out all his buddies and making sure everyone who got stinking rich off this bubble stays stinking rich. Meanwhile, house prices continue to plummet and mortgage availability gets worse.

Just this morning we got notification of MORE tightening in mortgage guidelines for Fannie/Freddie programs which are the only game in town except FHA. Housing prices are not going to bottom until there are buyers and the number of buyers will not equal the properties for sale until buyers can get financing. NOTHING that has been done in any of the bailout programs is doing ANYTHING to loosen mortgage lending guidelines nor lower the cost of mortgage funds. (though without the bailouts it would be worse as we probably would not have even the Fannie/Freddie programs that we do have). The bailouts have prevented a complete financial system collapse but they have done nothing to aid in putting in a floor on home prices.

Note that I am not talking about a return to the absurd mortgage programs of 2004-2007. I am talking about a return to "normal" mortgage underwriting. What we have today is crazy. With mortgage lending this tight, home values will continue to decline. Period.

In many markets, they need to continue to decline. California, Florida, Arizona, Nevada, much of the northeast and DC area and the Seattle area.... prices are still WAY too high relative to inventories, rental rates and median incomes. These prices will come down. But in other markets where the crazy home value appreciation the above markets experienced never happened, home prices are still going to decline because willing and able buyers are unable to obtain financing.

That said... there are STEALS out there in the home market. I have houses in town in Atlanta that I have purchased and done complete renovations on and the total investment is $65K and the homes rent for $850-$900 per month. The values relative to rents are well under historical norms (unlike the markets mentioned above even at todays lower values) and unlike a vintage Ferrari the cash flow is great. Cash and cash flow are KING. The bottom end of the housing market will turn up first and when values reach a level where rents and cash flow drive investors to buy (as opposed to purely speculative appreciation) then a bottom is in place. But if these investors have to pay cash or finance anything over 50% loan to value.... that bottom is going to be much lower and the overall negative economic impact will be much worse.

I will have another Daytona. But for now, the capital has much better uses.





Terry

 

I hope so!! I'll take 2 of each! ;-)

 

To quote Rodney Dangerfield in a line from "Caddyshack" ---

"SELL, SELL!!! ---- WAIT, YOU SAY EVERYONE IS SELLING??? THEN BUY, BUY!!!"

 

That bite in the ass will be painful for those who believe they are immune to this global downturn.

 

hahahahahahahaha excellent

 

Real estate will settle. For a while there we were wondering if normal business overdrafts and bridging capital would be available.

 

Good post. There a few interesting viewpoints in this thread.

410SA made a point where he perceives that people do have money, but are just holding out until there is a clear picture of where the economy is heading.

MRPBody44 perceives there is a false impression of wealth out there and people are simply highly leveraged. I am not sure which is more true, but I would be leaning towards 410SA because we have to understand that a great amount of money has been circulated into the economy at the expense of lenders over the last 5 years.

The housing market crisis is a collapse of our financial system and I think we have to look at who's really hurting. People have to remember that the low interest rate/easy lending has circulated ALOT of money into our economies. I'm sure a good chunk of that money went to stock investments creating tons of overvalued stocks over the last few years. The ones that are really hurting are the banks (the fools that lent the money), people who bought overvalued property, and people who bought overvalued stocks.

If people are going to spend, I think they first thing they're going to look for are investments. It will be a long way before there will be restored consumer confidence in high priced "toys." People are moving money away from stocks to more secure investments like bonds. If the housing market prices become attractive enough as "investments," where a steady cash flow is in place .... it should take the place of low return investments of bonds and stocks in the short term. I think stock prices right now are attractive for the long term, but I believe cash flow will take priority in these tough times. 410SA once mentioned that rental property investments are fairly passive and paces well with inflation, however, to get into it you would need a million bucks. If the housing market continues to slope downward, which I think it will, it should open up opportunities for those that do not have a million bucks , but have saved some cash to get these good deals. Cash is king and those who have it will be rewarded. As Terry pointed out... this will help flatten out the housing prices. Perhaps, the ones that have the cash will see through all the hoopla in the media and make the right moves on these deals. Once the prices start stabilizing, I'm sure lenders will loosen up their requirements for those looking to leverage a reasonable percentage. Afterall... lenders make money from lending money. They're just looking to minimize risk.

The bailout might not have a direct impact on the housing industry, but I think it has an indirect impact. First and foremost, the Treasury is looking to restore confidence in the consumer to stimulate the economy. The bailouts are more symbolic in my perspective. If the economy can stabilize, people's incomes will stabilize, and rental market prices will stabilize, giving investors in the housing sector a more clear cut picture of how to value these properties as investments. Cash is king and those who have it shouldn't be looking at Ferraris .

 

Cash will certainly be the thing to have and wield like a sword, in the days, months and years to come. Eventually the money markets and lenders will return but not to with the largresse or anything like what we have seen. The issue's at play are
- Have we seen the worst of the financial crisis, a lot of people here and elsewhere talk about the crisis as if the only problem is the banking industry, what about all of the other factors, the high oil price (now dropped), the deficit, the import/ export issues, the taxes, the trust issues, inflation, and on and on. Yes there has been blood on the floor, but until we have at least 50% of the blood on the floor, people writing out the cheques will be thinking long and hard, is this a good investment ?, should I trust this client ?, what will happen if it goes wrong ?.
- What will happen if all of the speculative investments made over the past 10 years have to be sold over the enxt 6 months, what will that do to the value of property or bling or Barret - Jackson or Yep Ferrari's.
- Surely it will all get a lot worse though because as we have learnt no-one will be immune, The American's paid more for the oil and issued too many crappy mortgage's, so they both paid the Saudi's for the oil and then borrowed money from the Chinese and the Saudi's to pay for their costs, mortgage's, Ferrari;s whatever. Now the Chinese are bleeding, double digit inflation, dwindling exports, even worse imports. I am sure the Saudi's are also having issues. This then means Australia is being hit by the exports to China being down double digits and on and on and on.
- And we have never seen a credit bubble quite like this, so no-one can say what will happen, but a credit bubble at the same time as a record deficit at the same time as everything else. Well the fan and the **** are well and truly going to meet.

Just my opinion

 

I agree 100%!

 

The 599 market is soft for some reason

 

.. qoute of the thread

 

Big thanks to Jim and everyone else for a valuable economic lesson. This is what I get so far....


1. F430 can be had for $170k, it's real and people still aren't buying. Reasons? People who don't have the money want to unload them and people who have cash can afford to wait. Nobody wants to buy expensive toys right now. Time is on the side of buyers but not sellers.

2. Exotic car market is crashing, mostly because it's been overvalued for over a decade - thanks to poseurs and greedy dealers. The days of flipping F-cars for profit, dealership 'list' games, low volume exlusivity is at an end. This is actually great news for auto enthusiasts who truly enjoy these cars.

3. Economy is crashing because the stock market along with real estate, gas price, currency and investments are all overvalued similar to the exotic automobile market. This is all thanks to idiotic banks who handed out too much money they didn't have.

4. Bubble economy is going to burst and scale of the crash is going to be hard to comprehend. This is not the burst of .com stocks of the 90's - it's global economic meltdown due to fundemental flaw in the modern financial infrastructure.

5. Cash is King and Time is Queen. Buyers can always wait another month, sellers might not be quite so lucky.

 

Heard a guy say the other day, "This economy is worse than my last divorce. Then I lost my wife and half my life savings. This time the wife is still here..."

 

Lambo owners seem to be happier people in general, since they are always conscious of the fact that their cars depreciate,a lot....
Ferrari owners seem to be shocked when they see their "highly desirable,limited production" 430s and 599s depreciate at all (still at slower pace then any other cars).

 

LOL!

 

I wonder if this is a chicken/egg thing. You are right though, I talk to a lot Ferrari sellers and a lot of Lambo sellers- generally speaking the guys selling the Lambos are happier. Not sure if that's BECAUSE they are selling the Lambo, or because the Ferrari sellers are grumpy that their F-car hasn't gone up in value.

I'm a hobbyist dealer, I really troll the bottom of the market looking for clean cars that are about to be floaters, so my perceptions are only based on the distressed asset seller. What I can tell you is that the Gallardo crowd is scrambling like mad- it would not surprise me to see some 04 E-gears in the $69-75K range here, real soon. I picked up a black E-gear for $80K, flipped it right before Lehman folded up. Only made $5K but could have been bad...

 

How much of this is due to the shrinking performance gap? I love Ferrari's as much as anyone else, but when a Chevy v8 is faster than a Ferrari v8 that has to hurt the FCars value.

 

IMHO Ferrari road cars for the most part have seldom been the absolute in terms of performance, but that never hurt them in the past.