The art market, as with the real estate market, enjoyed a meteoric rise in prices from the lows set back in 1991 (the last time the art market crashed). The peak of the market this time was punctuated in May of 2007, when David Rockefeller sold his Mark Rothko, “White Center (Yellow, Pink and Lavender on Rose),” for $72.8 million, far above the painting’s $40 million estimate, and setting records for both the artist and for any contemporary work at auction. The estimate was nearly twice the previous top price for a Rothko of $22 million set in 2005 at a Christie’s auction. (Rockefeller paid $10,000 for the painting in 1960.) A Jackson Pollock sold in 2006 for a staggering $140 million in a private sale by David Geffen (Geffen records, among other businesses). Geffen also sold a de Kooning that year for $137.5 million.
Since 2007 however, the art market has changed a bit. According to Frank Goss, owner of Sullivan Goss, An American Gallery and Arts & Letters Café, the art market overall is experiencing the worst contraction since the 1991 crash. What is interesting, as Goss points-out, is that auction houses have cut the number of works offered to roughly 25 percent of where they were a year ago. And, although top works will still bring world record prices, if the same works would have come to market a year ago, or two years ago, they would bring 20 to 25 percent more than today. Goss further states that second-tier works are down even more, with prices bringing 30 to 35 percent less today than the same works would have brought at auction a year or two earlier.
On a national level, so-called “Made in California” auctions of vintage, top-quality California artists, will still bring record prices, but again, as Goss states, they are still bringing 20 to 25 percent less than they would have a year or two ago.
Just as with real estate, art has had a fantastic run, lasting over ten years and up until last year. Art, again as with real estate, is illiquid, meaning that it isn’t easily converted to cash (sold), like treasuries and most stocks and bonds. As such, art tends to make large price-swings, both on the upside and the downside. And, just like other markets, there are segments of the art market that will perform better, (and others that will perform worse), than the overall market. Within the art market, the highest quality pieces are holding up relatively better, while works of lesser-known artists, and lower quality works in general, are really getting hit hard.
Closer to home, the Santa Barbara art market has also experienced tougher times, with three galleries out of ten closing recently. One relocated to Los Angeles, but it is not clear whether the other two moved or were closed for good. On the bright side, three new ones opened in town, so we are back to ten total galleries at the moment.
Goss advises that, as with the national scene, works of top California painters are still in high demand, and are still bringing record prices. However, he does recognize signs that the number of potential buyers has contracted noticeably in the past several months. Goss says that painters like Ray Strong (1905-2006) and Hank Pitcher (b. 1949), both of which Sullivan Goss represents, are highly desirable, regardless of economic conditions. Michael Drury (b. 1945; student of Ray Strong) is another famous California painter whose works will bring top money if offered for sale.
Recently, Goss received a call from an individual from Georgia, who asked if Sullivan Goss bought art. This individual had a painting of the Santa Barbara Mission by Edward Potthast, a well-known American Impressionist, painted circa 1905. Goss acquired the painting, and says he gets an inquiry every several months, but that a year or two back, there would have been more interest.
For lesser-known California artists, and especially local artists who have yet to establish a following, the current market for art is not a friendly one. Goss relates that, “If someone sees a painting on the gallery wall and asks, ‘Who’s that by?’ it’s all over. For the tertiary-level artist, the market is very dicey right now.”
There are reasons to be optimistic that the national and local art markets will start to improve. If the last crash, (and subsequent recovery), is any gauge, we should expect to see art prices rebound sharply, once the economy turns positive. Historically, art and real estate move together, so we can get a good sense of what to expect for art prices by watching real estate prices.
Just as with art, real estate crashed in the early 1990’s, and then entered a sustained bull market, lasting for about ten years. Given the recent price declines in art and real estate, there should be attractive opportunities in both markets for investors will a keen eye for quality, and patience. However, both art and real estate tend to lag the economy and stock market.
According to Goss, art collectors continued to buy for about six months after the latest recession started. In his experience, once consumer confidence turns positive, it should take at least six months before art buyers return to the market. With this said, he sees, “… deals the likes of which I have never seen before.”
Goss explains that cash is in short supply, and that savvy buyers are scooping-up great American works at deep discounts. Sellers also realize that cash is in short supply, and when they need to sell, are offering steep discounts. Galleries are then able to pass-on these discounts to buyers.
For artists, Goss says he is very reluctant to ever advise artist on what to create. However he does state that small, gem-like pieces offered at lower price-points, can still find buyers. He does advise that, due to the weakness in the real estate market, especially for very large homes, large, wall-sized pieces are not finding ready buyers.
Artist may want to consider postponing shows and exhibitions for at least six months, as we all wait for the economy to turn. Also, for artists who have works that they believe to be their best and of potentially significant value, waiting until the market rebounds will likely produce better results at sale or auction.
Finally, Goss sees many artists producing works that reflect our current, dire economic circumstances. Drawing parallels to the 1930’s and the art created at that time with subject matter dealing with the Great Depression, Goss recalls how art from that period reflecting suffering, WPA and other work programs, poverty, etc, are prized today for their emotional content. However, at the time, artists likely faced the same environment, in terms of selling their art, that contemporary artists face today. For collectors, the art being produced today with subject matter relating to current economic circumstances could very well garner significant prices in the future, although buyers at the moment may desire art with more uplifting content.
This is a tough time for the art market, and for artists, just as it is for all of us. But, just as the art market and economy rebounded after the 1991 crash, we will see improving economic conditions ahead. Buyers may be slow to re-enter the art market, but eventually they will return. Art collectors with cash on hand today, and a willingness to search for great deals, will find amazing art for bargain prices. Santa Barbara has a large community of artists, and my hope is that there are enough supporters of contemporary, local artists to carry them through to better times.