Art sales reaching historic number despite the economy
The numbers are staggering.
Earlier this month, Edvard Munch's iconic masterpiece "The Scream" -- one of four versions created by the Norwegian artist -- sold for $119.9 million at Sotheby's Impressionist and Modern Art auction in New York City. It set a new record for any work at auction. And some press and trade reports had speculated it would sell for between $150 million and $200 million. To put this in perspective, Christie's Impressionist and Modern Art sale the day before in New York totaled $117 million for the entire sale.
Just this past week, a Mark Rothko 1961 oil painting, "Orange, Red, Yellow," sold for $87 million, setting a new record for post-war art. The entire Christie's auction on Tuesday night of post-war art -- which included works by Gerhard Richter, Jackson Pollock, Yves Klein and Alexander Calder -- took in a total of $388.5 million.
And on Wednesday night, an Andy Warhol portrait of Elvis Presley as a cowboy, "Double Elvis (Ferus Type)," sold for $37 million at Sotheby's contemporary art sale. It was the first "Double Elvis" to appear on the market since 1995. Warhol produced a series of 22 images of Elvis. Nine are in museum collections.
At the same auction, a new record was set for a work by Roy Lichtenstein. "Sleeping Girl" sold for $44.8 million.
Despite the recession, fine art -- especially oil paintings -- have been achieving increasingly larger sums of money at auction.
David Norman, co-chairman of Sotheby's Impressionist and Modern Art Department, describes the sale of the Munch painting as "the most exciting moment I have experienced here."
"In 2004, Sotheby's sold the first $100 million picture, and to shatter the world auction record again for such an iconic and rare work of art that evening was nothing less than historic," Norman says.
Pricing the priceless
"What creates the value of the work of art is: Who is the artist and how important is that work of art within that artist's career," says Marcia Evans, an art consultant from Columbus, Ohio, and owner of the Marcia Evans Gallery. "And does the artist impact the generations that succeed him?"
Other factors include the overall quality of the work, and the rarity of the artist's works in the private marketplace.
"Most of the best works by the best artists get scooped up by museums, leaving fewer works available for private ownership," Evans says.
Also, the more museums have exhibited a work, either in-house or through loans, the greater the value the art takes on. And any kind of celebrity ownership in the work's history can also inflate the value.
But what made "The Scream" enter the record books was a perfect combination of elements: The iconic work is one of the most instantly recognizable images in both art history and popular culture, perhaps second only to the Mona Lisa. A pastel painting on board, this version of "The Scream" dates to 1895 and is the only version still in private hands. And the provenance of the work is sterling, having been brought to auction by Norwegian businessman Petter Olsen, whose father, Thomas, was a friend, neighbor and patron of Munch.
" 'The Scream' is worth every penny that the collector paid for it," says Tobias Meyer, Sotheby's worldwide head of contemporary art and the auctioneer who commandeered the sale of the painting. "It is one of the great icons of art in the world, and whoever bought it should be congratulated."
"The reason for these record-breaking sales is, quite simply, the quality of material on show," says Michael Frahm, a contemporary art adviser at the London-based Frahm Ltd. "The key is quality."
The Munch work isn't the only painting to fetch more than $100 million at auction in recent years. In 2010, "Nude, Green Leaves and Bust," an oil painting by Pablo Picasso, sold for $106.5 million, setting the record at that time for any work of art ever sold at auction.
The Picasso sale "really stimulated people who own art to get into the market," Norman says. "People are seeing demand, so they're choosing to sell."
Supply and demand is just one of many ways in which art prices take their cue from other parts of the business world. According to the Mei Moses Fine Art Indexes, over the last 50 years, art has outperformed stocks with annualized compound returns of 12.6 percent compared with 11.7 percent.
The Mei Moses Index, created in 2000 by New York University professors Jianping Mei and Michael Moses, tracks a proprietary database of some 27,000 repeat sales at worldwide auctions of investment-grade art.
The average purchase price across the entire index is $120,410. The index is issued by Beautiful Asset Advisors (artasanasset.com), which also tracks artist performance, sale estimates and other factors. But the recent Impressionist and Modern Art sales show a rather drastic reduction in returns compared to a similar sale in London in February based upon repeat sales. This says a lot about the current state of the market, even in light of the high record sale price of "The Scream."
Art, the new asset class?
Regardless of how the market is analyzed, experts say investing in art can hedge against stocks and bonds. But the art market comes with its own set of risks. Selectivity remains a key component in collecting art, as it has since the major downturn in the art market in late 2008.
This Thursday, Sotheby's New York will feature Childe Hassam's painting "In the Sun" in an auction of American art. The work, which depicts a young lady on a flower-filled porch bathed in sunlight, is expected to bring $1.5 million to 2.5 million.
It's just one of several stellar works that will be featured in the sale, among them George Bellows' "Tennis at Newport" from 1920 and Edward Hopper's "Bridle Path" from 1939, both estimated to sell at between $5 million and $7 million.
"The chance of loss from buying a major work of art by a major artist is fairly limited," Evans says. "However, the chance of loss from buying the work of a relatively unknown artist is very high."
An artist's works can take decades or more to appreciate in value, so flipping the work short term is pointless, especially because art dealer commissions take a big bite out of the proceeds of a sale.
"About 95 percent of all art doesn't go up in value at all," Evans says. "Thousands of artists graduate from art programs at universities every year, and many of them manage to get their work exhibited in galleries ... but most of the works don't go anywhere in terms of the market."
The art auctions in New York over the past month have recorded some record high sales.
• Edvard Munch "The Scream" -- $119.9 million
• Mark Rothko "Orange, Red, Yellow" -- $86.8 million (a new record for contemporary art)
• Roy Lichtenstein "Sleeping Girl" -- $44.8 million (a new record for a Lichtenstein)
• Francis Bacon "Figure Writing Reflected in Mirror" -- $44.8 million
• Andy Warhol "Double Elvis (Ferus Type)" -- $37 million
• Yves Klein "FC1 (Fire Color 1)" -- $36.5 million (50 percent more than the previous record)
• Pablo Picasso, untitled work from 1941 -- $29.2 million
• Jackson Pollock "Number 28, 1951" -- $23 million (double the old record for a Pollock)
• Barnett Newman "Onement V" -- $22.5 million (four times the old record)
• Gerhard Richter "Abstraktes Bild" -- $21.8 million
• Alexander Calder "Lily of Force" -- $18.56 million
• Salvador Dali, "Printemps Necrophilique" -- $16.3 million
• Willem de Kooning, untitled work from 1980 -- $14.1 million