First quarter sales continue next week in New York as Christie’s and Sotheby’s host their first American Paintings, Drawings and Sculpture auctions of the year. The category’s last appearance in Q4 2009 gave reason to believe that American art is on the upswing. Christie’s made news by bringing Andrew Wyeth’s second highest price at auction, and although the overall performance of the sessions paled in comparison to American art’s peaks in 2007, Q4 2009 was the first quarter since the recession to recover its pre-boom levels. For the past five years, success in Q4 of one year has been an indicator for success in Q1 of the next; when Q4 2006 performed better than Q4 2005, prices in Q1 2007 were superior to those of Q1 2006—and so on. Q4 2009 definitely outperformed its equivalent in 2008. Average prices increased by a hearty 65%, so there is reason to believe that Q1 2010 will be better than Q1 2009. [private_subscriber][private_bundle]

But before we paint a picture as pretty as a Hudson River Valley landscape, we should mention this: The upper end of the American market that was showcased in Q4 never suffered as much as the category’s lower value ranges, which are historically the bread and butter of Q1. Last year, works in the $1 million to $5 million range sold at a higher rate than they did in 2008, but lots estimated to go for less than $50,000 did their worst in five years. Since 361 of next week’s 366 lots are estimated to bring $50,000 or less, the approaching sessions will test the waters for the lower end of the value chain.

From 2005 to 2009, the American art market was 57.5% less volatile than the contemporary art market. As Fig. 1 shows, American art did not experience the same degree of price inflation as contemporary art during the boom and likewise has had a less precipitous decline since the bust. However, the market correction appears to have been more traumatic for the American sub-sector—at least in terms of buy-in rates. Fig. 2 demonstrates quarterly buy-in rates for American and contemporary art since 2007. American buy-in rates tend to be higher than those in contemporary, and after Q2 2008, the spreads between the two grew larger. Although both categories posted peak buy-in rates in Q4 2008, by the following quarter, contemporary’s buy-in rates had come back down to 10-15%, while American’s remained above 30% throughout 2009.

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