Common Sense: Record Prices Mask a Tepid Art Market

The art market would seem to be going through the roof. But is it?

Despite the headlines and the hyperbolic enthusiasm of many auctioneers and dealers, the broad market for fine art is in the doldrums, according to experts who track sales data. Many works are selling near or below their low estimates or failing to sell at all.

As measured by the Mei Moses World All Art Index, a widely cited benchmark, the market for fine art declined 3.3 percent in 2012, and gained 2.2 percent through November, even with the recent record-setting sales. Strip out traditional Chinese art, the value of which has been surging for years thanks to the interest of wealthy Chinese buyers, and the performance would be much worse.

By comparison, the Standard & Poor's 500-stock index gained 13.4 percent in 2012 and is up more than 27 percent so far this year.

At Sotheby’s, where “Silver Car Crash” set a record for Warhol, another image of a car crash, this one in green called “5 Deaths on Turquoise,” sold for just a little more than $7 million. A Warhol portrait of Liz Taylor with a yellow background went for $18 million (not counting commissions), below its $20 million to $30 million estimate. And at Sotheby’s, another Rockwell with a religious theme, “Walking to Church,” sold for just $2.8 million before the buyer’s commission, below its $3 million to $5 million estimate. (Estimates don’t include commissions.)

But at least they sold. Sanford Robinson Gifford’s Civil War masterpiece, “Sunday Morning in the Camp of the Seventh Regiment,” which was on loan to the White House and had hung in the Oval Office for over 20 years, didn’t sell at this week’s auction at Christie’s, which must have come as a shock to New York’s Union League Club, which had owned the painting since 1871. It was estimated to fetch $3 million to $5 million.

A Christie’s spokeswoman said afterward that “there was steady client interest” in the painting before the auction, “given the painting’s exceptional rarity and historical significance.” But at the auction, the bidding “simply did not meet the reserve price.” The spokeswoman, who declined to be named, citing Christie’s policy, added that interest in the work was still “very much alive.”

What explains the sharp gap between perception and reality?

“What we’ve seen is that the explosive prices represent only a tiny, tiny subset of lots,” said David Kusin, a former Metropolitan Museum of Art curator who also worked on Wall Street and now runs Kusin & Company, a consulting firm in Dallas that specializes in the economics of the art market. “They get all the press, but we’ve seen relatively stable hammer prices in most categories over the past few years.”

And just two distinct categories have pushed up the averages.

“Postwar, contemporary art — artists active from 1950 to the present — which includes Francis Bacon, Jackson Pollock, has been doing extremely well for the past 25 years,” Michael Moses, a retired professor of economics at New York University’s Stern School of Business and a co-founder of the Mei Moses Art Index, told me this week. “And traditional Chinese art — works created before 1900 — has been doing even better.”

Mr. Moses said his data indicated that traditional Chinese art had gained a compounded annualized rate of return for the 10 years ending in 2012 of 15.5 percent. Postwar and contemporary art gained 11.6 percent. By contrast, old master paintings gained only 3.3 percent and American paintings just 1 percent. And the overall index gained 7.4 percent.

Some find the whole notion of an art market to be distasteful. Michael Findlay, author of “The Value of Art,” and a director at the Acquavella Galleries in New York, said: “What I believe in is the social and aesthetic value of art. We live in a society where everything is so monetized, the only way people can talk about art is in terms of money.”