A Look at How the Art Market Is Faring

1. Quality is key. Dazzling works by renowned artists -- from Picasso to Warhol -- will be valuable, even if prices drop.

However, "if you are not an owner of a major work by the right artist, you are likely to find few takers," says Petterson. "The art market has narrowed its focus, and what we see in auction today is a much more blue-chip contemporary art, or exceptional, rare pieces. It is this quality supply which holds the market up."

2. Contemporary pieces are especially hot in today's market. (That means works produced in recent decades, rather than centuries.)

The outlook is strongest for works from the 1950s through the 1970s by Western artists who had "strong curatorial and art historic support, but [were] neglected by the market," Petterson says.

Some top names from 2007 and 2008 auctions so far: Francis Bacon, Andy Warhol, Tom Wesselmann, Mark Rothko, Takashi Murakami, Gerhard Richter, Robert Rauschenberg and, of course, Pablo Picasso, among many others.

3. Works by emerging artists are less expensive and have room to appreciate. For instance, many Chinese artists have seen the value of their work increase tenfold over the past few years.

Among rising stars in the Chinese realm are Zhang Xiaogang, Yue Minjun, Zeng Fanzhi and Chen Yifei, whose works recently set personal records near or below $5 million.

Petterson also suggests honing in on areas like India, Pakistan, the Middle-East and South-East Asia.

4. Beware of the speculative bubble.

Those who have been buying up "cheap" works of art for tens of thousands of dollars and selling them quickly at a relatively high profit may not be able to do so much longer. Auction houses have become more selective and such "exceptional price levels are starting to look like ceiling prices," according to Artprice.com's 2007 market review.

5. Pick the right middleman.

It's important to cultivate relationships with dealers and galleries that can find a buyer if the auction market has dried up, Petterson says. Similarly, the right connections are crucial to acquire works at the right prices when you're building a collection.