The Wall Street Journal tells us the art market is a blue-light special.

This commentary by Marion Maneker is available to AMMpro subscribers. (The first month of AMMpro is free and subscribers are welcome to sign up for the first month and cancel before they are billed.)

One of the big problems with gauging the ups and downs of the art market is figuring out what we’re measuring. Much was made last week of the fact that the auctions were down from last year. These conclusions rely on headline numbers—sale totals—to measure the market.

A third fewer dollars were spent on works of art at these November sales than in November 2018. The natural conclusion is that art market is in a cyclical swoon. The inference is that there is less demand for art this year than last.

But the art market isn’t a commodity market. This year’s mix of lots on offer is significantly different from last year’s lots. It;s more like other heterogenous markets we measure on a regular basis, namely the real estate market. When the National Association of Realtors releases its monthly report on existing home sales, the headline number is the number of transactions, not the aggregate value of all homes sold in the month.

The NAR doesn’t even publish average home prices. They publish median home prices. Finally, and most important, we don’t see national economic statistics for the housing market based upon where homes are selling relative to asking prices.

All of this comes to mind when reading The Wall Street Journal’s somewhat overstated conclusion that last week’s buying activity constituted “a bargain-hunter’s paradise.”

Eleven years ago, during the same sales in 2008, we did see what legendary art shop-a-holic Elie Broad called a “half price sale” when the November auctions took place in the midst of the first shocks of the global financial crisis. Then, highly motivated sellers looking to raise cash for a bumpy time ahead were forced to accept terms from the few buyers still willing to part with money in exchange for art.

It’s not at all clear that these sales were even remotely like those. Let’s remember that going into both the October sales that coincide with Frieze art fair and these New York sales, the overall mood of the market was quiet trepidation. Would buyers show? Would they spend?

In both October and now in November, the results were surprisingly strong. We will have some numbers in our AMMpro analysis shortly. In the meantime, we do have some broader observations that call into question the Journal’s conclusions.

Take this point made by the Journal:

• “About 43 works at Sotheby’s and Christie’s $401 million combined evening sales of impressionist and modern art last week sold for less than their low estimates. That means skittish sellers opted to lower their reserves, or the minimum amount at which they agreed to sell the works, rather than risk having them go unsold.”

Those 43 lots sound like a lot. But they represent about 30% of the sold lots. From the way the Journal presents it, 30% of of the sold lots failing to reach the low estimate would seem to be a big departure from previous sales. It isn’t.

Auction house estimates are not appraisals. They are tools for marketing the works. The bargain hunters trope that the Journal is employing relies on the idea that auction house estimates are like list prices. When the item is marked on sale for a price lower than list, we call the buyers bargain hunters.

Commodity markets can have list prices, heterogenous markets like art and housing don’t. In commodity markets, the price drops and buyers come in. At auction, the buyers don’t know what the prices will be. They rely on estimates as an indication whether the buyer might be able to get the work on the cheap. For the auctions to be “a bargain hunter’s paradise” the potential buyers would have to know the works were available for low prices. That wasn’t the case in these sales.

Indeed, it was the other way around. The defining feature of the current art market is high expectations coming from sellers which has resulted in high estimates. If the works sold in New York were bargains, they were discounts from already high prices. Had the market fallen steeply this year resulting in much lower estimates, we might be able to call a strong sale in that environment a “bargain hunters paradise.”

The Journal also wants us to believe that the rise in sales at Phillips this season was additional evidence that art buyers are sniffing out bargains:

• “Phillips also said its $40.2 contemporary day sale represented a 58% bump from similar sales a year ago. Phillips said overall sales topped $108 million, up 22% from last fall and a sign that the boutique house’s mostly middle-market offerings are luring bidders away from Sotheby’s and Christie’s.”

That last bit, “luring bidders away,” is rhetorical license. The Journal knows Phillips saw bidding as weak or weaker than at the two major houses. So whatever increase in sales there was at Phillips was not accompanied by strong, competitive building.

When it comes to markets, human beings seem to be hard-wired to seek out narrative explanations, to seek out patterns in seemingly random events. If .we need a narrative for last week’s sales, we might be better served by the idea that the art market continues to add strength in the middle range. A greater number of buyers is competing over a greater number of lots at a lower price level.

That trend produces lower headline numbers, sales totals. But it masks increased participation and the spreading of value over a greater number of lots. Without a sharp shock to the market, sellers’ expectations remain too high. That’s what provoked the auction houses to prod consignors to accept prices below the low estimates.