In the wake of the September 11 attacks, art dealers were among the most jittery of business people. New York is the center of the world art market, after all, and the big fall auctions were scheduled for early November. With the economy sinking, no one was sure collectors would turn out as usual to bid for million-dollar paintings and sculptures. Happily, many not only came but bid big bucks for choice pieces. The auctions "restored confidence" in the market, says Kent Logan, a retired securities executive, who with his wife Vicki is a major art collector in Vail, Colo. "A lot of collectors had been deferring decisions to see if the market was going to fall off a cliff. It didn't."
Although upbeat, art is not the overheated market it was back when newly minted millionaires drove up prices for trendy contemporary works to exorbitant levels. "A lot of the silliness and froth--the dot-com nonsense--is now gone," says Tobias Meyer, worldwide head of contemporary art at Sotheby's (BID). But with a price-fixing scandal giving Sotheby's and Christie's a black eye and upstart auction house Phillips, de Pury & Luxembourg adding to the competitive heat, buyers were surprised by the market's relative strength. "Many [established] collectors showed up hoping to find bargains and ended up frantically bidding for the best works," says Marc Porter, international managing director at Christie's.
A case in point is Eli Broad, chairman of the Los Angeles-based financial services company SunAmerica Inc. He paid $2.2 million for Mirror #1, a record for one of pop artist Roy Lichtenstein's mirror paintings, then ponied up $2.5 million for an untitled drawing by Jasper Johns, another record. For both pieces, he paid above Sotheby's top estimated price. "I didn't see any bargains for [top-quality] work," Broad says. Another sign of the times: When London collector Charles Saatchi put Blue Umbrella #2 by the American Alex Katz on the block, it fetched $666,000, a record for that painter.
Like the stock market, art is also segmented, and prices and values fluctuate with demand. Jiangping Mei and Michael Moses, business professors at New York University who have created an index of some 5,000 artworks sold and resold at auction, estimate that since 1990 the price of Impressionist works has fallen by 25%. By contrast, Old Master paintings soared 74%, and classic pre-World War II American paintings rose 91%.
Indeed, if there's a single dominant trend in the art market, it's "Buy American." It goes back at least to 1999, when Microsoft (MSFT) Chairman William H. Gates III paid $36 million for Lost on the Grand Banks by Winslow Homer, according to ARTnews magazine--10 times the previous auction record for a Homer. This spring, Sidney Kimmel, chairman of Jones Apparel Group (JNY), laid out a record $6.2 million for a 1928 painting by Georgia O'Keefe. Moses expects the price of classic American art to keep climbing because of the patriotic post-September 11 zeitgeist.
Post-World War II American works are plenty hot, too. That's less for patriotic reasons than because art historians, dealers, and collectors now regard the work as hugely important and are singling out artists-- such as Andy Warhol, Lichtenstein, and Johns--as modern masters. "The great things from the post-World War II period are going to become unbelievably expensive," says Sotheby's Meyer.
When great Impressionist and Modern works do hit the market, the bidding is furious. At the fall art auctions, Le Moteur by Fernand Leger went for $16.7 million and Portrait de Mme K. by Joan Mir? for $12.7 million. Camille Pissarro's La Rue St. Lazare sold for $6.6 million. But you can still find occasional bargains. Last month, Boston money manager Scott Black, a savvy collector, nabbed an 1869 Renoir oil portrait for $776,000--less than Christie's estimated $800,000 minimum. Black thought the market had underrated the quality of the Renoir painting.
The big question now is whether art prices will crash in 2002. Art experts say a price decline usually lags an economic slowdown by up to a year. Broad isn't expecting a big correction like the one in 1990. "Good works will continue to command good prices," he says.
As usual, less-well-heeled collectors must search out more affordable niches. For instance, contemporary photography is still within reach of small collectors. Kelly Close, a San Francisco equity analyst with U.S. Bancorp Piper Jaffray, admires Mona Kuhn, whose latest photos go for about $900. Close also is considering buying one of the recent nature prints of Richard Misrach, an established photographer who shows at San Francisco's Fraenkel Gallery. Asking price: $1,400.
Other collectors buy works of living painters and sculptors. Arthur Goldberg of New York has a long track record of scoping out the best contemporary artists early on and buying their work for a few thousand dollars, a fraction of the price later. These days, Goldberg is high on two young artists, Amy Cutler and Mark Bradford, who show respectively at the Leslie Tonkonow and Lombard Freid galleries in New York. Bradford does colorful abstract paintings with elements of collage. Cutler does tightly executed paintings influenced by Persian miniatures.
Video art, shown on TV monitors, is also gaining in popularity. San Francisco venture capitalist Richard Kramlich has been buying pricey pieces by established stars, such as Bill Viola, whose works go to $500,000, and Sherin Neshat, whose art can hit $250,000. On a more affordable scale, he commissioned a work this year by the less-well-known Doug Akin for about $40,000.
Experienced collectors say you shouldn't count on art being a good investment. "It's a passion, not a business," Broad says. Happily, though, art does tend to appreciate over time, according to NYU profs Mei and Moses. They figure that over the last 50 years, art has earned an average annual return after inflation of 8.2%, vs. the 8.9% annual return of the Standard & Poor's 500-stock index for the same period. The other good news: "We found that art prices seem to hold up reasonably well in times of recession and war," says Mei. You can't ask for more than that. By Thane Peterson