Toward the end of 2008, almost all investments, art included, were crashing because of the financial crisis. But the decline in the art market was somewhat different; there were other factors in play. As Velthius writes, the art market was already so “overheated,” that even without the “crisis in the financial market, a downturn would seem inevitable” (Velthius, 1). He also notes that between August 2007 and January 2008, research indicated that confidence in the contemporary art market had already dropped 40%. So the first assessment I make of the art market’s crash is that it could have been inevitable because of the drastic increases in value before the crash, whether or not the financial crisis happened in the first place.
The second assessment I make about the crash is based on the ArtForum interview with Pablo Underhill – who is considered to be a “retail anthropologist.” Underhill says that the way the public interacts with art has changed. He believes that “the act of looking at art has become one of social expression.” I think part of the point he is making here is that “art has evolved into a way of overcoming status inconsistency.” With this in mind, it’s kind if easy to see how so many people want to be a part of the art market. The problem is that for some who get involved, they can’t afford the risks that go along with the financial and art markets and wind up selling at almost any price when they need money. The result is that a downturn in price turns into a crash. This probably explains why there was an even greater drop in prices for works that were not at the top end of the art market. In November of 2008, the Wall Street Journal reported that the Vice Chairman of Sotheby’s (Tobias Meyer) said that “the price disparity between good and great has widened to humungous” (WSJ, 11/20/08). And, according to Meyer, the problem for the “trillion-dollar global art industry is that most of the art it has for sale is, by definition, just average.” Based on these comments, as well as Underhill’s assessment of why some people get involved in the art market, the economic downturn and financial crisis were almost certainly going to cause a crash in the art market. And this is especially true or those who were holding average works – which probably did not include a lot of super rich people who were better able to withstand a decrease in prices. This probably explains why most of the major dealers, auction houses, and collectors were able to weather the storm. But for the average person who may have lost a job, and was collecting just average art, he or she may have needed to sell a piece at most any price just to survive, which in turn further depressed prices and made the crash even worse.
Here is a link to the Wall Street Journal Article written by Alexandra Peers: http://online.wsj.com/article/SB122713503996042291.html
I think this illustration by David Gothard describes the crash in the art market for those who relied on their artwork as a means of money if they needed to sell. 