Some investors seeking an alternative to liquidating stocks are looking at cashing in their art collections, and will find that selling now comes with a price.

Investors considering selling their artwork, antiques and collectibles face a market down 20% to 30% in some categories with little indication of things getting better any time soon.

Although it is difficult to generalize across all types of art, the Mei Moses Annual All Art Index, which tracks 13,000 repeat-auction sales of the same works, dropped 4.5% in 2008, the first decline in five years.

This looks rosy compared with the 37% drop in the S&P 500 return index, but the results are skewed by positive sales results early last year before sales fell off, says Michael Moses, co-founder of Beautiful Asset Advisors LLC. The company compiles the index. In a tracking report released Tuesday based on first-quarter art sales, the Mei Moses All Art Index plunged 35% and "puts the market on target for the second largest annual decrease since 1925," following the 39% decrease in 1991, the report stated.

"This has been the most substantial destruction of personal wealth that we've probably ever seen," Moses said. He predicted the market could take a decade to recover, noting that after the last art bubble, from 1985 to 1990, prices dropped 65% and didn't return to those levels until 2003.

Investors are looking to notable spring and summer sales at top auction houses for an indication of what's to come. Those houses are lowering sales estimates across the board, says Elin Lake-Ewald, president of O'Toole-Ewald Art Associates Inc.

What's more, sellers will be hard-pressed to find auction houses to guarantee a minimum price for a property, no matter what it sold for previously.

Those guarantees were a common practice in boom years as auction houses tried to win business. Sotheby's (BID) recently announced plans to limit their use, blaming them for losses of more than $60 million last year, according to a regulatory filing.

Still, some investors will be obliged to put art on the market.

"It's times when death, divorce, or disaster hits and sometimes you have to sell," says Lake-Ewald, who is an expert in art market recessions. "The farther you go into the recession, the less likely you are to get the higher prices."

As an example, Lake-Ewald cites last November's auction by Christie Group PLC (CTG.LN) of 16 postwar drawings from the collection of Lehman Brothers chairman Dick Fuld and his wife, Kathy. One of their pieces, Willem de Kooning's "Woman," which was estimated to sell for up to $4 million, sold for $2.8 million.

Art dealers and appraisers say rarer pieces of art, such as old masters paintings, tend to hold value better than newer, lower-priced works. Sellers may also find a better price in the private market than at auction.

"The best and rarest items hold up in very tricky times because the rarity, desirability and track record makes people feel secure," says Natalie Bauman, co-founder of Bauman Rare Books in Philadelphia.

For investors with cash to spare and an interest in art and antiques, this may be time to pounce on the bargains and rare gems surfacing in the market. As speculators bail out, serious investors can build their collections and negotiate for attractive prices. Bauman cites the recent sale of a first edition of the Federalist Papers and economist Adam Smith's The Wealth of Nations, which rarely come to market.

Experts recommend that investors carry out extensive research to ensure they are picking works that will appreciate over time. They should study past auction sales and both the artist's and the item's history, whether it be a painting or a piece of antique furniture. Since art is considered a "passion investment," the market can be fickle - propping some artists up for unpredictable reasons.

(Shelly Banjo is a Getting Personal columnist who writes about wealth management and philanthropy; she covers topics including tax and estate planning, investment strategies, charitable giving and the independent sector. She can be reached at 201-938-4046 or by email at shelly.banjo@dowjones.com.)

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