Art market update: Searching for
terra firma

Detail of Back of Hollywood, 1977, by Ed Ruscha. (macLYON, France. © 2023 Ed Ruscha)

Table of contents

1. Market trends
2. Q&A: Why is luxury booming?
3. 10 things collectors should know when it comes to private foundations
4. Curator’s corner: Ed Ruscha’s Clock Speed
5. Bank of America in the art world

The art market is still in search of price equilibrium years after coming off the highs of 2021. Buyers continue to expect lower prices at both auctions and galleries. Sellers continue to hold off on discretionary selling until demand regains its prior price elasticity. Moreover, auction estimates will need to ratchet down to more enticing levels, and galleries will need to be more open to negotiating prices. Collectors, meanwhile, are considering works by more historical (well-known and lesser-known) artists along with works by midcareer and established contemporary artists. Current conditions are also providing opportunities for collectors transacting in the middle market ($100,000 to $3 million), where there are broader offerings and greater leeway for negotiation. Lastly, single-owner collections and estates will continue to provide the headlines that lead to temporary spikes in market activity and interest.

The art market correction is adjusting price expectations. 2023 saw the art market’s first contraction year since 2020 — a much-anticipated reassessment of the pandemic era’s indiscriminate and unprecedented highs. In 2023, global auction sales across all fine art categories decreased 27% from 2022, and the average price of an artwork sold at auction decreased by 32%, marking it the largest single-year decline for average sale prices in over seven years.¹

Amid this drop, collectors saw a widening discrepancy between buyers’ and sellers’ price expectations. We also saw this supply-demand mismatch play out in the primary market as dealers at this past December’s Art Basel Miami Beach reported fewer sales than the prior year.² While many works priced in the tens of millions of dollars went home with their respective galleries, most pieces that were offered at or below $100,000 sold fast.

Even the auction houses are responding to a leaner market. Following a 19% decrease in overall auction sales in 2023, Sotheby’s announced it would reduce the fee it charged buyers across all price ranges while instating a formalized fee structure for consignors — including a “success fee” for works sold above their high estimates. Whether the success fee incentivizes auction houses to set increasingly more conservative estimates or the new commission structure increases transaction costs for sellers remains to be seen. Also worth watching: Will the other auction houses follow suit? Only time will tell, but collectors can expect overall auction estimates to come down and galleries to bring lower-priced works to fairs as discretionary sellers wait until market conditions improve.

Industry consolidation will continue. This year, collectors should expect to face a shrinking pool of art world players, who will have to work overtime to garner business from buyers and sellers. In early 2024, Hindman Auctions based in Chicago, and Freeman’s, based in Philadelphia, announced they were merging to create Freeman’s | Hindman. The newly formed entity, which boasts the largest auction footprint in the US along with a partnership with UK-based Lyon & Turnbull, will be a formidable player in the middle market. Executives from Freeman’s | Hindman cited “an increasingly competitive auction market”³ as part of the reasoning for joining forces. This merger follows Bonhams' acquisition of four regional auction houses in 2022 and 2023. When not consolidating resources, auction houses, more broadly, are reducing head count. In 2023, Sotheby’s reportedly laid off several senior employees as well as staff from their NFT Art Auction Department. Phillips eliminated senior leaders and regional staff, and online auction platform Artsy had a round of staff cuts. Auction houses will reallocate head count savings into mission-critical investments, such as guarantees, that will help them win competitive lots or reassure cautious collectors in a down market. 

Rate cuts could spur investors. Bank of America Global Research expects three rate cuts by the Federal Reserve over the course of 2024,⁴ which should alleviate financing pressures on collectors and art businesses. And just as the anticipation of these cuts has fueled the capital markets this year, this bullishness may prompt collectors to increase their discretionary spending on non-interest-bearing assets like art and collectibles, especially in categories that experienced pullbacks last year.⁵ However, seller confidence and price expectations were shaky in 2023, when the appetite to sell fell by a third from the prior year.⁶ Lastly, decreasing costs of borrowing may lead some collectors to generate liquidity from their art collections through an art loan, enabling them, for example, to fund broader lifestyle and wealth-building objectives without having to sell art. While the art market typically lags behind other economic indicators, we remain cautiously optimistic about how rate cuts may impact collectors’ behavior in 2024.⁷

Some collectors might get off the waitlist. For collectors, 2024 should provide opportunities for long-awaited access to works and artists who have been much in demand. Following a quieter 2023 Art Basel Miami Beach, New York galleries are presenting shows with works at lower price points in the first half of 2024. This year’s winter and spring exhibitions, even at mega-galleries, kicked off with a group of fresher faces, including Abdoulaye Konaté at Lévy Gorvy Dayan, Julian Charrière at Sean Kelly, and Huma Bhabha at David Zwirner. For many emerging collectors, this moment represents a chance to be more selective instead of buying from a gallery’s program just to gain access to more coveted works. It could also mean finally getting off a waitlist or even the opportunity to negotiate better terms with a gallery (i.e., asking for a 10% discount, eliminating “buy one, gift one” terms and the like). While we do not expect steep discounts at galleries, now is not the time to pay a premium. Collectors should take advantage of this environment to access works off their wish lists during this quiet period.

Women artists are finally getting their due. Collectors are paying increased attention to the women in the room. Auction sales of works by women artists were up 10% last year to $788 million. This comes on the heels of two big increases in 2022 and 2021, which saw sales grow by 29% and 55% year over year, respectively.⁸ Although the top three women artists by sales were Yayoi Kusama, Joan Mitchell and Georgia O’Keeffe, some lesser-known, historically important women artists are receiving recent attention. One example is Joan Snyder, whose painting The Stripper sold for nearly half a million dollars during Christie’s fall 2023 auction —300% more than its high estimate. Snyder joins the ranks of other women abstract artists, such as Grace Hartigan, Lynne Drexler and Alice Baber, who worked during the 1950s, ’60s and ’70s and have only recently gained significant secondary market momentum. These artists have all reached their auction highs in the last two years.⁹ Last year, 14 of Hartigan’s works and about a dozen of Baber’s works sold for triple their estimates, and 63 works by Drexler achieved hammer price ratios that were nearly double their estimates.¹⁰ Interestingly, these women’s proximity to canonical artists (for example, Hartigan had a close relationship with both Jackson Pollock and Willem de Kooning, and Drexler studied under Hans Hofmann and Robert Motherwell¹¹) may be one of the reasons for their particular appeal in a period of economic uncertainty. The recent emphasis on quality and narrative may continue to drive value-seeking collectors to focus on A+ works by underrepresented historical artists more broadly over B works by canonical artists: The entry price is lower, the market is not yet saturated and the proximity to the establishment still makes it a relatively safe bet.

Q: Your team has built a reputation for working with top fine art collectors across the country. How do luxury collectibles fit into your offering?

A: When Bank of America first launched Art Services, it was in response to a recognition that art as an asset class often made up a considerable portion of our clients’ balance sheets. In many instances, luxury collectibles are no different. They represent both an allocation and a passion for our clients. While we do not lend against luxury goods, we often work with our clients’ luxury collections via Consignment Services. 

Q: Do you regularly sell luxury assets through Consignment Services?

A: We actually do! It’s become an unexpected but truly enjoyable part of my role in Art Services. Our Consignment Services program applies to many luxury goods as well: We build a full sales strategy for the client, get competitive bids from auction houses, negotiate the terms of the seller’s agreement, help develop a targeted marketing plan and ultimately see the sale through until the end. Historically, we have sold handbags, jewelry, collectible cars, watches and wine for our clients. 

Q: In what context do you typically see a client sell luxury goods via Consignment Services?

A: We see luxury goods come through for a number of reasons, including estate transfers and divorces, of course, but we’ve also seen a greater influx of interest since the pandemic. During this period, prices of many luxury collectibles skyrocketed. Everything from pandemic boredom to the bull market to low interest rates to buyers and sellers becoming increasingly comfortable with transacting online led to this boom. Many of our clients have wanted to take advantage of that price appreciation and to get access to our relationship with top auction houses through Consignment Services.

Q: Are collectors still transacting online post-pandemic?

A: More than ever. Many collectors, especially younger collectors, are now comfortable with the online platforms that were perfected in 2020 to 2021. In fact, in 2023 luxury collectibles accounted for the largest share of online sales at Christie’s, Sotheby’s and Phillips.¹² The category “jewels and watches” accounted for 28% of online-only sales at those auction houses.¹³ The ability to transact digitally in that way is a key reason why jewels and watches auction sales grew 10% year over year at the houses last year.¹⁴

Q: In which luxury categories have you seen the most market movement?

A: Personally, I have always been most interested in the luxury watch and handbag markets, but it also happens that those are two categories that have seen incredibly interesting market movement over the last few years.

Q: What do you mean by that? What’s happening in the luxury watch market?

A: It’s been fascinating to examine the luxury watch market since the beginning of the pandemic. When I talk about luxury watchmaking, I focus primarily on Patek Philippe, Audemars Piguet (AP) and Rolex. We were previously in the biggest boom in Swiss luxury watches. Between early 2020 and mid-2022, there was a surge to record-level pricing on the secondary market.¹⁵ The demand was consistent with what we saw across the board in art and collectibles: Wealthy consumers were sitting at home with money to spend.

Now the manufacturers are starting to see primary demand cool. The even sharper decline is in the secondary market. The market for secondary Rolex and Patek Philippe watches fell to two-year lows by the end of 2023. The Bloomberg Subdial Watch Index, which tracks prices for the 50 most traded watches by value in the secondary market, was down over 40% between its high in April 2022 and the end of October 2023.¹⁶ We are seeing collectors slow down their purchases on the heels of higher interest rates, inflation and geopolitical tensions. Of course, it’s not all bad news. The most in-demand models for these top brands still trade well above retail, no different from the most sought-after blue-chip art.¹⁷

Q: Are you seeing a similar dynamic for luxury handbags?

A: The Hermès market, long considered the gold standard of collectible handbags, tells a similar story in its initial surge but has played out differently from the watch market in recent days. During the pandemic, we saw an extraordinary increase in demand. Hermès sold 30% more bags in 2020 than in 2019.¹⁸ But unlike most of Hermès’ luxury counterparts last year, the brand beat expectations in 2023. Despite the same economic and geopolitical headwinds as the rest of the luxury sector, Hermès handbag sales in the Americas rose 20% year over year.¹⁹ In the primary market, the scarcity mentality — all known as the “Hermès game" — keeps collectors wanting more. In the secondary market, Hermès’ Birkin and Kelly bags regularly trade three times higher than retail, increasing their appeal even further.²⁰ The brand is truly in a category of its own.

Q: What are your favorite buys for men and women in these categories?

A: All my answers are price and condition dependent, but for men, the Patek Philippe Aquanaut or an Audemars Piguet Royal Oak Perpetual Calendar have been popular for quite a while. Both watches strike the right balance of sporty but not overly casual. The ladies’ Patek Phillippe Nautilus is the crème de la crème of women’s watches on the market. For something sportier at a lesser price point, I also love when women sport a men’s Rolex Daytona. For handbags, an Hermès Kelly Sellier 25- or 28-cm in a durable leather, such as Epsom or Togo, and a neutral color like gold, gris or black, will never go out of style. You can wear it for decades and pass it on to the next generation.

Q: Are there any bags that have caught your attention lately?

A: While they are not necessarily top of my wish list, I do love a party trick. For me, the Chanel Lait de Coco milk carton bag definitely falls into that category. So does the Hermès Mini Bolide on Wheels. I love something whimsical and out of the ordinary that not everyone is carrying. Even better? Chanel and Hermès never go out of style.

By Michael Duffy, head of Art and Collectibles Planning, Private Wealth Strategic Wealth Advisor for Merrill, and Rosemary Ringwald, head of Art Planning, Planning Center of Excellence, Bank of America Private Bank

As an undergraduate art student in the late 1950s, Ruscha donned various creative hats, working as a commercial illustrator, sign painter, graphic designer and typesetter at an advertising agency. These diverse roles left an indelible mark on his artistic style, influenced in part by the groundbreaking work of Jasper Johns and Robert Rauschenberg, both of whom embraced found objects and everyday imagery, forever changing the trajectory of American contemporary art.

In an era before the internet and social media, Ruscha’s playful compositions reflect the relentless influx of mass media-fed images and information. His 1962 painting Large Trademark with Eight Spotlights was a standout in the “New Paintings of Common Objects” exhibition at the Pasadena Art Museum alongside works by luminaries such as Andy Warhol and Roy Lichtenstein. This groundbreaking exhibition is often said to the beginning in America of what we now recognize as pop art.

Ruscha’s visual language often included words as images, but by the 1980s, he also depicted symbols and familiar objects against evocative backgrounds, such as the flag against the gridded background in Clock Speed. Some say they see a flag reflected in the windows of a high-rise building. As a Los Angeles native, I see the flag fluttering almost collagelike against the grid of the city streetlights.

For Ruscha, the essence was to, in his own words, “successfully overlap two unlike ideas.” Clock Speed encapsulates this fusion, inviting viewers to unravel layers of meaning within its dynamic composition. It’s a visual symphony that transcends time and beckons viewers to engage with its dynamic composition, inviting a nuanced exploration of its layered meanings.

Bank of America is the national sponsor of ED RUSCHA / NOW THEN, recently on view at the Museum of Modern Art and opening at the Los Angeles County Museum of Art (LACMA) on April 7.