In July of 2007, Kerry Keane sat marveling at an array of vintage guitars at Christie’s New York headquarters. The specialist in fine musical instruments picked one up, gently strummed a few chords, then exchanged it for another and another. Keane had so far amassed 20 instruments for the company’s semiannual auction, including a hard-to-find 1951 Fender “Nocaster” with an ash body and black pickguard, and a 1953 Fender Telecaster. The October 12 sale also featured a black 1959 Les Paul Custom electric guitar, like the one played by Fleetwood Mac’s Lindsey Buckingham, and a 1941 D-45 by C.F. Martin & Co., whose pre-War instruments are highly sought after.

Christie’s had high expectations. At its April guitar auction, all 11 instruments sold, including a 1941 Martin D-28 acoustic that went for a record $264,000. This time, the auction house offered 40 guitars and was more ambitious in its estimates. Keane, a trained guitarmaker who’s been with Christie’s since 1999, when the company got into the vintage-guitar business with an auction of Eric Clapton-owned instruments, predicted that the aforementioned Telecaster would “easily go for $50,000.”

But on that damp October morning, Christie’s hopes were hardly playing out. In a half-empty auction room, many guitars took weak bids, some too low for the instruments to sell. An 1864 classical guitar made by Spanish luthier Antonio de Torres sold for $157,000, but most of the rest sold in the lower end of their estimated ranges. As powerful bidders such as Fred Oster, a Philadelphia dealer, and Chris Martin, president of C.F. Martin, looked on, the Telecaster flopped, selling for $32,000. A similar scenario played out two days later in Boston, where Skinner, a boutique auction house, sold only two guitars at stellar prices.

Acknowledging that he had expected more-robust bidding, Keane says, “bidders were more selective this time.”

The tepid results are the latest sign that the air is escaping from the vintage-guitar bubble, a trend that leading dealers began noticing in mid-2006—especially with electric guitars. (Acoustics, traditionally steadier performers, are faring better than the more fad-prone electrics.) The slowdown comes after several years of breathtaking growth that went into overdrive in 2002 and saw the value of some guitars nearly double every year. The market drew in everyone from investors seeking to diversify their portfolios to moneyed baby boomers eager to acquire guitars they worshiped in their youth. But last year, as more owners hoping to grab a piece of the action put their instruments up for sale and collectors began cashing out to lock in appreciation, the market became glutted with some models, sending prices falling.
 
“People who had noticed the incredible growth of the prior three years started buying more for speculative reasons,” Keane says. “So the market overheated.”