Have medallion prices peaked?

When last reviewed here, prices for Chicago taxi medallions had risen to an average of $185,000.  Prices have since peaked at $202,000, but now are below that previous level.  The March Chicago Dispatcher printed edition includes an ad offering to pay medallion owners $750/month, which implies almost 5% ROI if prices stabilize.

Month                Price               Source

February ’10      $183,000        Chicago Dispatcher
January ’10        $184,000        Chicago Dispatcher
December ’09    $202,000       Chicago Dispatcher
October ‘09       $185,000       City of Chicago
May ‘09             $170,000       Chicago Dispatcher
April ‘09            $164,500        Chicago Dispatcher
March ‘09           $165,000        Chicago Dispatcher
February ‘09      $158,000        Chicago Dispatcher
Feb ‘07               $  77,000        Chicago Tribune
2004                   >$40,000       Chicago Tribune
1991                     $28,000         Chicago Sun Times

Eventually the City of Chicago may post more recent information here (scroll down to “Taxicab Medallion Transfer Price List” for the pdf report.)

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6 Responses to “Have medallion prices peaked?”

  1. Rob Ross says:

    I’d like to write a policy paper about this and market it to the Tribune and maybe Heartland and the Illinois Policy Institute. Interested?

  2. michael levine says:

    If you are writing a policy paper you should have the facts. The $202,000 was not a peak it was an aberration. Email me a contact number and I can give you more info than you ever wanted to know about medallion prices, why they are where they are, and where they may be going.

  3. Rob Ross says:

    After a long conversation with Michael Levine, an expert on cab industries across the US, I have a better picture of the role of cab medallions and medallion financing in the provision of cab services. Basically, he said that, for the most part, cab medallion prices accurately reflect the increase in earning potential for real cabs. He does not believe them to be artificially inflated, and he sees the involvement of financiers in the market as a good thing because it provide liquidity that allows cab operators to easily purchase the equipment they need. He said that it is difficult for the price of medallions to be artificially inflated because the people investing in the market have good information regarding the earning potential of a cab.

  4. Administrator says:

    What I infer from the above is that the medallion doesn’t have much speculative value, but rather its value is based on actual typical current revenues. That’s consistent with the 5% yield medallion owners can apparently obtain by leasing.

    Real estate, by contrast, won’t yield nearly as much current income (after expenses). Even at today’s prices, buyers of rental property seem to be counting on future appreciation.

    However, just because buyers “have good information regarding the earning potential of a cab,” I don’t see why they would not expect to see medallion prices increase along with inflation, and thus bid them up so the current yield is less than 5%. Perhaps there are other risks.

    None of which contradicts the basic fact that fare increases will raise (and increased medallion tax would lower) the price of medallions, not the earnings of drivers.

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