Panic Prices; what we learned a decade ago?

[Davandron]

So we all know that this panic buying is an irrational, short term reaction in the market, but I began to wonder if there was any research done when this happened in 1994.

In the March 1999 issue of the Dept Of Justice research brief contains Impacts of the 1994 Assault Weapons Ban: 1994–96 which includes market research.

Primary market prices of the banned guns and magazines rose by upwards of 50 percent during 1993 and 1994, while the ban was being debated in Congress. Gun distributors, dealers, and collectors speculated that the banned weapons would become expensive collectors’ items. However, prices fell sharply after the ban was implemented. Exhibit 4 shows price trends for a number of firearms. Prices for banned AR–15 rifles, exact copies, and legal substitutes at least doubled in the year preceding the ban, fell to near 1992 levels once the ban took effect, and remained at those levels at least through mid-1996.

It's a medium-length paper, covering a great deal of scientific findings. Might be a good read for lots of reasons.

In 2004, the same authors published An Updated Assessment of the Federal Assault Weapons Ban: Impacts on Gun Markets and Gun Violence, 1994-2003. This is a length research paper and appears to contain a great deal of information and scientific (not political) analysis.

In the market section:

Prices of assault weapons rose substantially around the time of the ban's enactment, reducing the availability of assault weapons to criminal users in the very short run. However, a surge in assault weapon production just before the ban caused prices to fall in the months following the ban.

Two interesting bits stuck out for me, first AR-15 prices.

Prices of ARs, on the other hand, remained steady during the late 1990s (after the speculative price bubble of 1994-1995) both in absolute terms and relative to other rifles. The failure of AR prices to rise in at least relative terms, as occurred for [Assault Pistols (AP)], and the temporary drop in production of AR-type rifles after the ban may signify that the AR market was saturated relative to the AP market for a least a number of years following the ban. However, demand for AR-type rifles later rebounded, as evidenced by the resurgence in production of legalized, AR-type rifles in the late 1990s. In fact, more of these guns were produced in 1999 than in 1994. Unlike AP users, therefore, rifle users appear to be readily substituting the legalized AR-type rifles for the banned ARs, which may be another factor that has kept prices of the latter rifles from rising. All of this suggests that rifle owners, who have a lower prevalence of criminal users than do handgun owners, can more easily substitute rifles with fewer or no military features for the hunting and other sporting purposes that predominate among rifle consumers.

As a young person hearing tales of "dollar-menu" SKS and AK rifles back-in-the-day, I assumed that prices on ARs had risen over the years. In fact, it sounds like AR-15s cost the same price in 2007 as they did in 1993! (The first paper says AR-15s were "$825–$1,325" in 1993) Since the price is still the same, if we adjust for inflation, that represents a 30% DROP in the "cost" of the AR-15 rifles over the years.

Bit number two: while large-capacity magazines (LCM) for rifles quickly dropped in price after the panic faded, magazines for handguns doubled in price and stayed there. I see people going crazy over rifle magazine prices, but as far as I've seen handgun magazine prices haven't shot up.

So, any thoughts and comments from the people who were buying in 1992 - 1996? Likewise, as other people read these papers I'd like to hear your thoughts and observations on the market reactions.

Edit to attach graph of prices

 

[Kilgor]

Nice post.

 

[benEzra]

Bit number two: while large-capacity magazines (LCM) for rifles quickly dropped in price after the panic faded, magazines for handguns doubled in price and stayed there. I see people going crazy over rifle magazine prices, but as far as I've seen handgun magazine prices haven't shot up.

In 1994, prices shot up because most handgun magazines are proprietary designs, whereas the most popular "black rifles" use standardized magazines.

The 1994 Feinstein law exempted every AR/AK magazine on this planet that was manufactured prior to 9/1994, and those magazines were freely importable after 1994. Think of hundreds of millions of AR and AK magazines sitting in NATO and former Warsaw Pact warehouses around the world in 1994; that was probably about a hundred-year supply. Those were imported as needed to meet demand and hence prices were stable (they were actually cheaper in 2002 than they were in 2006 or 2007).

NATO and the Warsaw Pact did not, however, stockpile a hundred million Glock, S&W, and Ruger magazines so they could sell them for pennies on the dollar after 9/1994 (darn). Thus, the supply was fixed to what was already in the civilian pipeline, with far less of a guaranteed surplus, so prices went high and stayed high. Also keep in mind that in 1994, the handgun/rifle interest ratio among enthusiasts seemed to be tilted very strongly toward handguns, so it was a perfect storm for handgun prices.

Now, on the other hand, we have several factors going on that together raise rifle magazine prices.

(1) Vastly increased "installed base" of EBR's. There are now roughly as many EBR owners as there are active deer hunters, bird hunters, and skeet shooters combined, increasing rifle magazine demand.

(2) Strong shift of the handgun/rifle interest ratio back toward modern style carbines, increasing rifle magazine demand.

(3) Katrina, after which people realized that if something bad happened, you might be SOL unless you already had what you needed; a lot of people began stocking up a little more, increasing rifle magazine demand.

(4) H.R.1022 et seq, which made it clear that any future AWB would NOT allow importation of preban magazines, and would control postban rifles and magazines far more tightly and subject them to even more idiotic and draconian rules.

(5) Lessons learned from the passage of the original Feinstein scatology. A lot of us got burned BADLY by the Feinstein law, even though it banned no guns. Personal story---in mid-1994, I had put off the purchase of a folding stock, figuring it was the financially responsible thing to do; it was $70+, we had been married only a year, and she had just finished college. So I waited, figuring the ban wouldn't pass (like my Democrat father said, "That won't pass, this is America." Well , he and I were wrong, and I kicked myself in the posterior for ten years for not getting the stock I wanted when I (legally) could have; I finally bought it the day after the Feinstein law expired in 2004 (there were certainly plenty for sale '94-'04, but I didn't want to break the law). Likewise, my wife paid $100 for a $20 Glock magazine in the mid to late '90s; she had suggested picking up some Glock mags in mid-1994 also, even though she didn't yet own a Glock, but again I advocated "fiscal responsibility" and we didn't get them cheap when we could have.

I can tell you that if I didn't already own an AK with rails, an optic, and plenty of magazines now, I would be among the horde buying them. I learned my lesson, big time.

 

[outerlimit]

I think there were only 1 or two AR makers back then, like twenty or more now.

 

[benEzra]

I think there were only 1 or two AR makers back then, like twenty or more now.

I counted 33 from BATFE's 2006 production stats list, IIRC, and those were just the ones I could positively ID as AR manufacturers from Googling their websites. Not all of them are large (some are probably custom shops), but there are quite a few big ones also.

 

[mason_winston]

so, is the message here that we should maybe buy a stripped lower or two now, and then pick up the rest of the parts after the market has settled a bit (or after the AWB is back)?

 

[Shooter88]

As per the last ban, a stripped lower would not be grandfathered. It would have to have the evil features before the date of the ban. However, the next ban is likely to be worse.

 

[mason_winston]

As per the last ban, a stripped lower would not be grandfathered. It would have to have the evil features before the date of the ban. However, the next ban is likely to be worse.

unfortunately (or fortunately), I was 16 and more concerned w/showing the inside of my car to as many girls as possible than I was in the AWB.

if you're right, it seems that the message is mixed - either buy everything now at insane prices, or hope that the market cools a little and/or obama has better things to do immediately after taking office so prices may drop a little - am I close?

EDIT - is there any real truth to the idea that already owned weapons will not be grandfathered?

 

[Davandron]

LCM prices in post ban

In the second paper, they spend all of section 7 discussing magazines (LCMs).

It's interesting that they note how prices fell for rifle magazines, such that 1998 prices were the same as 1992 prices, yet significant numbers of rifle magazines were not imported and don't appear to be a cause. Imports for 95, 96, 97 and 98 added together increased the supply by only 2.8%, despite being approved by ATF for ten-times as many.

I'm curious where all those importable magazines are right now ;^) Seems like if people expect a new ban to be passed that includes foreign magazines, they would be shipping them in by the tens of cargo-containers to get them grandfathered.

 

[Davandron]

Lower Receiver & Grandfathering

If a ban were passed, the law would say that grandfathering only applied to the rifles that were completed before a certain date. So, technically, a stripped receiver would be subject to the new laws. But the well-discussed thought is "how can they prove when you completed it?"

What I'd want everyone to do is use their own judgment and the information they can find to make an informed decision on their purchases. That said, the data (in the papers, and in talks I've had with Elmers) indicates that, even if a ban is passed, prices are likely to recover, so unless you need it now or in the next year, you are probably best served by waiting it out.

 

[Old Fuff]

While I cannot say if a new AWB will be passed, I am sure that if it is, “past mistakes” will be corrected, and the language / descriptions tightened so that production of cosmetically-altered guns can't continue to be manufactured. It is also unlikely that a sunset provision will be included.

For what it is worth, back in 2007, well before the election campaign of 2008, the NSSF made a survey, and much to the surprise of some discovered that the sale of “tactical firearms” had risen to the point where there were equal (or almost so) with the sale of “traditional firearms.” Since that survey, the sale of traditional hunting and target guns have declined, and sometimes sharply so. On the other hand the sale of “tactical firearms increased throughout 2008, and immediately after the ’08 elections the graph line went up into a vertical line. Presumably this level of increasing sales will continue throughout the early months of 2009, and perhaps longer. Looking back toward the election of 1994, I would say that the Democrats could push this issue if they wanted to, but if they do it will be at great political peril. Since 1994 the number of “tactical firearm” owners has increased substantially, and to a number where they are politically potent, plus they are widely distributed throughout the country.

 

[2fewdaysafield]

Wow! This is a serious learning post. Going to have to study it for a while, then post some questions. Most posts are more "fun" than educational. This one I suspect is going to be an advance degree in gunenomics.

 

[Davandron]

Old Fuff: Do you happen to have a source for the 2007 / 2008 sales, especially conventional vs tactical? That was another piece of the pie that I couldn't find papers on (what happened to sales / prices after the ban expired).

Edited: Oh, I just realized you might be talking about the NSSF's Industry Reference Report. Wish they would give away the old ones for free; $70 to advance a forum discussion is a little high for me :^)

 

[Lone_Gunman]

I personally do not recall ever seeing the price of banned assault weapons ever going down during the ban. I can tell you that Colt prices basically doubled when the ban took effect and stayed there. They never went down. You are quoting things from the Department of Justice bureaucrats, and may be biased.

So we all know that this panic buying is an irrational, short term reaction in the market

No we don't all know that. I don't think the panic buying is irrational. I have not bought a single gun since it started, but if you didnt have all the things the Democrats are about to ban, you better get them now.

 

[Old Fuff]

Can't help you much. I just saw a summary.

However, the larger makers of traditional firearms are public companies, although many of them are owned by larger corporations. Anyway, the firearm company (example Smith & Wesson or Ruger) or larger holding corporations file financial reports each quarter. Google up the Securities Exchange Commission and see what data they might have to offer.

I know for example that Smith & Wesson took a big hit because Thompson-Center (with is owned by S&W) took a big drop in sales. All of T-C's firearms are of the traditional kind.

 

[corncob]

Best thread in a good while.

 

[CoRoMo]

However, the next ban is likely to be worse.

They'll definitely have made the adjustments to avoid what they'd consider mistakes. The next ban could be permenant, and that would certainly cause you AR to only skyrocket like a pre-'86 full auto has. They might even prohibit the sale, ever selling what they ban. Sort of like my dad who built a 1911 out of a raw frame with no S/N. He can't sale it, gift it, or will it to anyone(at least we were told this, BIMBW). You'd keep your hi-cap AR til you die and then your family surrenders it to the ATF.

 

[Hawaiian]

The next ban will be much more encompensing than the last. It will be much more than simply banning certain features. They want the EBG's gone completly. I belive it will come. The only question is when.
And the grandfather clause will apply to competed rifles only. That is why I hope RRA completes the 9mm I ordered in time for me to SBR it before a ban comes into effect. Yes, the SBR build on an existing rifle is considered manufacturing, thus it needs to be completed before any ban comes into effect.

 

[2fewdaysafield]

Here's my take on what this all tells us for the future.

1) If an AR, Ak etc is on your list of "must haves" and you haven't already got one, then get it now, regardless of price.

2) If an AR or an AK is one of those "be nice to haves", but something you can live without, then wait, they will either be illegal or cheaper.

3) When and if a new ban is passed, IF it is not as draconian as some us fear it will be (I.E. if its similar to the Clinton ban) the price of ARs and AKs will fall.

4) I gather from reading this that there may not be the big stockpile of Hi Cap mags that there once was and that the price may not fall even if already imported Hi caps are grandfathered. This would suggest to me that if you need more, now would be the time to buy them, even at current prices.

Got to reread the sources linked, but what think you? Am I interpreting this right or am I lost in space?

 

[elmerfudd]

I remember the first ban pretty well. The price of "pre-ban" guns went way up and stayed there for about 10 years. Some mags were cheap, while others like those for Glocks or AUG's were out of sight.

 

[Ignition Override]

Davandron:
Outstanding information. You 'test out of this class' and receive free credit!
I finally read a basic summary of what the AWB was really about, instead of fragments on various gun websites.
Glad that I bought my SKS last spring (along with lots of ammo spring-summer), long before the election.

The 'NSSF' study was referred to.
What is the NSSF?

 

[Archer]

NSSF= National Shooting Sports Foundation.

 

[RP88]

the problem is that the next ban isn't even in writing yet. We have no idea what will happen until the writing comes out. By then, it won't really matter since we'll know exactly what was to happen the moment it comes out, because it will start happening the very next day.

 

[rfurtkamp]

What we learned over a decade ago was 'never again' - those of us who couldn't have what we wanted in '94 due to age, money, state of residence, etc. went a little over the top in 2004.

And who can blame us?

I was never ever again going to have to pay $80+ for decent magazines, or to not have the features I wanted on the guns I wanted to keep.

I was also a severe skeptic and assumed I had a very short time before the 2004 election would doom the short window of freedom, and bought accordingly.

Everything I purchased in the ban-sunset frenzy has gone up in value by a mile, even before the '08 election rush.

Most of that I attribute to dwindling supplies of suitable parts kits (and import restrictions) and the like rather than any fear - in '04 and '05, semi-auto Uzis retailed from Vector from the mid-$500s. My first 51 was well under 4 figures. FALs were still dirt cheap until kits and recievers flat out dried up. AK kits were $80 or less in bulk. I remember people scoffing at the CA DOJ surplus HK94s at 2k and how they'd never sell, etc.

That's not AWB-fear-panic=buying driving that up, it's the pure fact that this stuff just isn't available any more by the palletload from wholesalers.

Panic buying is a factor now, but honestly for gun owners who were around and had some means in 2004-2007...this panic shouldn't have affected you negatively at all.

 

[Lone_Gunman]

honestly for gun owners who were around and had some means in 2004-2007...this panic shouldn't have affected you negatively at all.

That is my situation. When the AWB ended, I acquired plenty of magazines, even for guns that I do not yet own!