The Stagnation of the Middle Market: Beneath the High-End Hype, Art Prices Are Treading Water

The Stagnation of the Middle Market: Beneath the High-End Hype, Art Prices Are Treading Water
Below the frothy high-end sales, is the art market actually collapsing in the middle?
(Courtesy Aminimanda via flickr)

When journalists talk about the "growing art market," they are mostly relying on news about eye-popping, record-breaking prices for a handful of trophy works. In Adam Davidson's terrific New York Times Magazine piece on the art market and inequality a few weeks ago, he led with a $120 million Munch, an $87 million Rothko, and the fact that "from 2003 to 2007, the fine-art market grew even faster than subprime housing. And then it kept on growing, pausing only momentarily during the crisis before hurtling even further upward." But hurtling upward for whom? Mostly, for the very lucky few who own the best examples of the most fashionable artists' works. Where does that leave the rest of the market? What is the current market status of works by well-known artists that may not be worthy of a lengthy catalogue essay, but that nonetheless make up the bulk of fine art sales by the big houses?

On Tuesday, Mike Collett-White of Reuters noted that demand for super-rare, high-quality works has created a "'virtuous cycle' that has lasted for three years so far." But in fact, ARTINFO has found that for this same period the middle market has been much more finicky, returning to 2010 price ranges during the spring sales this year, even as the very top of the market soars. This fact has some serious implications for art investors and collectors alike: Davidson points out that the top works of art are generally not investments, as "no painting bought for $30 million or more has ever been resold at a profit." The trophy market is the one that is growing. Theoretically, to make money buying art you need to find reasonably priced works that will grow in value over time — thus, middle-market stagnation could be the reason there aren't endless examples of successful art investment vehicles (though, of course, a few people have gotten lucky).

This isn't the first time the middle market has wavered noticeably. The last time it happened was in mid-2008, just as the beginnings of the financial crisis were showing themselves. In July of 2008, ArtTactic's Anders Petterson told Reuters that "falling share prices and inflationary pressures appear to be taking their toll on the middle market." Nearly four years later, with concerns about the global economy again in the air, ARTINFO's analysis of sales above $100,000 across five different fine art categories in our BASI database — Old Masters, Latin American art, American art, Impressionist and modern art, and contemporary art — suggests that the middle market, which we defined as sales between $100,000 and $1 million, is actually down significantly from the spring of 2011. Despite reports of the art market's "Scream"-ing success, both mean and median prices, as well as the number of lots sold in that price range, are at or below 2010 figures after experiencing a pop in 2011.** 

At the high end of the market (lots above $1 million), median prices in the five categories have grown an average of 21 percent since spring of last year. Median prices for middle market lots, on the other hand, are down an average of 10.5 percent in the same period. Essentially, then, what you have is a "growing" auction market that is resting on stilts — soaring only because of a few dozen trophy purchases by a small pool of deep-pocketed collectors. 


There is no doubt that in an absolute value sense, the fine art market is growing. Spring sales in the five categories we looked at are up 17.5 percent in the last year, with Impressionist and modern art bringing in $110 million more than 2011 (technically, slightly less than one "Scream"), and contemporary fetching $155 million more (roughly the sum of three of the top lots in those sales) — up 12 and 14 percent, respectively. The year before, the five categories grew an average of 11 percent, even though spring 2011 was a relative disappointment in the Impressionist and modern art category (spring 2010, after all, was the season of the $106 million Picasso and the $103 million Giacometti).

These growing sales totals, however, don't necessarily reflect a growing business. From spring 2010 to spring 2011, the auction houses saw a 16 percent spike in the number of lots sold over $100,000 in the five categories. But from spring 2011 to spring 2012, the number of lots sold above $100,000 in the first five months of the year shrank. Latin American art, generally considered to have fairly low volatility, was the only category to increase the number of lots sold above $100,000 (a 10 percent increase over spring 2011). Impressionist and modern shrunk by 14 percent, and contemporary by 4 percent.

The apparent paradox — growing sales totals and decrease in significant lots sold — suggests that the average price is increasing, which may erroneously lead one to the conclusion that art values are increasing across the board. Higher "average" prices haven’t produced more than a temporary bump in the middle market — certainly nothing worth touting as making art "better than stocks" for the average investor. In fact, a closer examination of the data subtly points to volatility and slumping prices for all but the highest echelons of the market.


In essence, much of the growth across the five major categories since spring 2011 has come from sales above $1 million. For Old Masters, Latin American art, and contemporary art, the explosion has continued for two years. In spring 2010, in the relatively calm Latin American art category, the auction houses only did a total of $4.8 million in sales on lots sold for above $1 million, with the highest-priced lot fetching $1.4 million. By 2012 the figure for $1 million-plus lots sold was $17.4 million, and one Matta work brought in over $5 million.

In the contemporary art market (which almost needs its own article because of the crazy growth and volatility at the top end), there were $551.6 million in top-end sales during spring of 2010, when the market was just beginning to recover from the downturn. By spring 2011, $768.5 million of the one million-plus lots were sold through auction houses. This spring, the amount of money brought in by the top end lots jumped another 18 percent, to $907 million.

Since contemporary art seems to be in a category of its own, it is, in fact, worth breaking out sales above $5 million, which seems to be the new definition of the "high end" in contemporary art. Lots sold for more than $5 million accounted for $259.4 million in sales in spring 2010, $393.1 million in sales in spring 2011, and a whopping $672.9 million in spring 2012. That means that a mere 43 of the  1,150 contemporary lots sold this spring accounted for two-thirds of the total haul. If we were to skim just a few lots off the top, the numbers might point to an art market in disarray. (Remember the November Impressionist sale a Christie's New York last fall? It was nothing but doomsday talk for 24-hours after the $25-35 million Degas sculpture failed to sell).


Meanwhile, even as the sales of top-of-the-line trophies have skyrocketed, the middle market is treading water. While sales of lots between $100,000 and $1 million grew along with the upper tier from spring 2010 to spring 2011, sales in the middle market for the five categories shrank by an average of 12 percent in the more recent year. In the middle market, total sales for spring 2012, along with the number of lots sold in the five categories, were about even with figures from spring 2010. In other words, all of the growth in the art market in the last year has been at the very top.

The most affected categories seem to be Impressionist and modern art, where the median price for a work in the middle-market range went from $230,361 in spring 2010 to $322,000 in spring 2011, but plunged down to $215,481 in spring 2012. Median middle-market prices for all five categories over the last three years have, on average, gone from $210,000 in spring 2010 to $240,000 in spring 2011 right back to $210,000 in spring 2012. The mean for the three springs is slightly higher than the median, but follows the same trend, moving from $283,000 in 2010 to $305,000 in 2011 back down to $291,000 in 2012. Though the sample size is small, the trend may suggest that mid-market prices hit a peak and are beginning to correct themselves, despite the "growing" art market.


Of course, the data that ARTINFO has looked at tells just one story, though one that is important. These are five of the largest categories of fine arts sold through auction houses in North America and Europe, and as such represent a good cross-section of the secondary art market. But the "art market" is much more than the publicly recorded results of paintings that hit the auction block. The auction houses conduct private sales, and of course there are the private dealers and galleries — all of whom keep their sales private. Other than anecdotal evidence picked up at fairs and rumors heard at parties, it's impossible to know how the other half of the art market is doing. (The lack of a developed gallery scene that is one of the reasons that many are skeptical that China is really the world's largest art market, as many reports that look only at auction sales have it.) 

Furthermore, ARTINFO chose to look at data from 2010 onward — after the great bloat of 2003-2007 and the crash of 2008-2009. Was 2011 an anomaly that is being corrected in 2012? Will the upcoming summer and fall sales bring completely different results? These are questions for another day.

To see the chart ARTINFO created comparing the high-end to the middle market, click here.

*ARTINFO pulled data from auction houses between January 1 and the first week of June, 2012, comparing it to the equivalent time periods in 2010 and 2011. We pulled all lots that sold for more than $100,000 in five categories: Old Masters, American art, Latin American art, Impressionist and modern art, and contemporary art. While the vast majority of results come from the "big two" auction houses, Christie's and Sotheby's, our database contains auction results from over 400 different houses, and the data also contains lots from Phillips de Pury, Bonhams, Swann, Strauss & Co., Dorotheum, Bukowskis, and more.

We deliberately left China out of this analysis, as we do not yet have all of the 2012 results from the Chinese spring auctions, and furthermore are skeptical that all reported results have actually been paid for.

**Numbers have not been adjusted for inflation.