Market: A Stumble, But No Crash

By: John Dorfman

January 2008

NEW YORK—As the big fall auction week approached, the de rigueur sentiment among the art punditocracy was that the day of reckoning was finally at hand. With the Dow dropping and the real estate market reeling, it seemed like a fitting time for the end of a party that surely couldn’t go on forever. Eight days and $1.3 billion worth of auction sales later, no one was talking crash anymore. However, the results were definitely mixed, a far cry from the across-the-board bullish behavior of the past several seasons. And while buy-ins and below-expectation prices caused chagrin to the auction houses, paradoxically they may bode well for the art market.

Christie’s led off with its Impressionist and Modern sale on the evening of November 6, and while the house trumpeted its total take of $394.9 million as the second highest in the history of art auctioneering, the mood during the sale was not quite so celebratory. The crowd seemed subdued as lot after lot sold solidly within estimates—and often at the low end of the range—rather than leaving them in the dust as auction-goers have grown accustomed to seeing.

Cézanne’s "Portrait de Vallier" (1904–06) sold for $17,401,000, certainly an impressive price, but it was estimated at $15 million to $25 million. Likewise, Camille Pissarro’s "Quatre Saisons" (1872) set an artist record of $14,601,000, but Christie’s had expected it to make between $12 million and $18 million. The sale’s top lot, however, did soar well beyond its high estimate: Matisse’s summery, joyful "L’Odalisque, Harmonie Bleue" (1937) (est. $15–20 million), ended up at a record $33,641,000. The work, a beautiful elaboration of one of the artist’s characteristic themes, is a portrait of his model and muse, Lydia Delectorskaya.

The next night at Sotheby’s, there were some decidedly awkward moments, none more so than when not a single bidder raised a paddle for "Fields (Wheat Fields)," painted by van Gogh in Auvers in 1890, shortly before his death. By setting the low estimate at $28 million, the auction house was asking too much for a painting that had been recently shopped around.

More than a quarter of the works, including some by very desirable artists such as Picasso, failed to sell, and even the top lot, a Tahitian-period Gauguin titled "Te Poipoi (Le Matin)" (est. $40–60 million) went for a price below the low estimate, selling for $39,241,000. In that case, only one person was bidding, Joseph Lau, the Hong Kong collector known for his recent pricey Warhol purchases. When the sale was over, Sotheby’s was clearly hurting, and in response, the public company’s stock fell by 28 percent the next day.

In a rare departure from press-release happy talk, Sotheby’s executive vice president David Norman, worldwide head of Impressionist and Modern art, conceded in a statement that the sale "saw a market which very clearly responded to attractive, historically important property that was estimated in line with its expectations and resisted property that didn’t fit that criteria." The problem for both auction houses is that high estimates attract consignors, and the consignors then demand guarantees, which the auctioneers have to grant lest the consignors take their property to a rival institution. The van Gogh "Fields" had been guaranteed, so Sotheby’s huge loss on that picture has to be subtracted from the sale total, which was nominally the third highest in the company’s history.

The less-than-stellar results of the Impressionist and Modern sales don’t necessarily mean that the market is in trouble or that tastes have shifted seismically. "Believe it or not, it’s actually a healthy sign," says New York dealer Jane Kallir, of Galerie St. Etienne, a specialist in German Expressionism. "Spiraling prices are unhealthy. Anything that causes the market to wind down and taper off in an organic way without triggering a collapse is good, and in the best-case scenario, this is the beginning of a return to sanity."The art world’s mood brightened considerably once the contemporary sales got under way. At Christie’s on November 13, it was clear from the beginning that things were going to be different; once again, high estimates were being left behind. The second lot of the sale, a cartoonish Yoshitomo Nara picture of a blank-faced girl, brought a more than double-estimate $1,497,000. Lucian Freud’s "Ib and Her Husband," a 1992 portrait of a spooning couple, (estimate on request, in the region of $18 million), sold for $19,361,000, a record for the artist.

Records were also notched for Ed Ruscha, Richard Prince and Gerhard Richter. The top lot was, perhaps not surprisingly in light of last season’s results, a Rothko, "Untitled (Red, Blue, Orange)," from 1955 (est. $25–35 million), which went for $34,201,000—just under half the price the artist commanded at Sotheby’s in May.

The second highest price of $23,561,000 was paid for a turquoise "Liz," silkscreened and painted by Andy Warhol in 1963 and consigned by the actor Hugh Grant, who reportedly bought it for $3.5 million six years ago. Christie’s estimated it at $25–35 million and gave Grant a guarantee. In this case, disaster was averted, but the price was a bit disappointing, being slightly under the low estimate. Interestingly, another Warhol portrait, of the boxer, Muhammad Ali, from 1978, fared much better, tripling its high estimate to bring $9,225,000.

Sotheby’s recouped considerably on November 14, achieving the highest-earning sale in its 263 years in business and racking up some huge contemporary art prices. Francis Bacon’s "Second Version of Study for Bullfight No. 1" from 1969 (est. in excess of $35 million) sold for $45,961,000, shy of the record but certainly a disappointment to no one, while a Bacon self-portrait from the same year, estimated in excess of $15 million, went for $33,081,000. Jean-Michel Basquiat’s "Untitled (Electric Chair)," from 1981–82, (est. $8–10 million) brought $11,801,000. Jeff Koons nudged Damien Hirst off his perch to become the most expensive living artist (at auction) when his corny valentine "Hanging Heart (Magenta/Gold)" sold for $23,561,000 (est. $15–20 million)—more than double the $11,801,000 paid the previous night for Koons’s giant diamond-ring sculpture, "Diamond (Blue)" (1994–2005), which Christie’s had been displaying on its front sidewalk for weeks before the sale. In both cases, the buyer was Koons’ dealer, Larry Gagosian.

Once again, the market showed its hearty appetite for postwar and contemporary works already deemed canonical by critics and art historians. And basically the same old crowd was doing the buying. Art advisor Thea Westreich says, "It’s very interesting to note how many of the lots were captured not by the international market we keep hearing of, but by the same players. In terms of blue-chip contemporary, it looks like mainly Americans and Brits."

Lately, the auction houses have been telling consignors and the public that the market is crash-proof because the pool of buyers is so much deeper and more globally diverse than ever before, so that crises in local markets can’t have too much of an impact on the art market as a whole. Whether or not that is really true, at least for now the English-speaking art world has expressed its continuing confidence in contemporary art, and given the Impressionist and modern departments of the auction houses something of a warning.