Thoroughbred horses are notoriously flighty—and so are their prices.
During the recession, prices for Thoroughbreds took a devastating fall, with many predicting that top horse values would never recover to their 2005-2007 highs.
The average price at the September yearling sale at Keeneland—widely considered the top benchmark for top Thoroughbreds —fell more than 40 percent to $60,734 in 2009 from $112,427 in 2006. Last year, average prices started making up some lost ground, getting back to $87,354—or just about equal to 2001 levels, without adjusting for inflation.
In 2005, there were 40 horses sold at the auction for more than $1 million. Last year, there were seven.
"I think we're still in recovery from the financial crisis," said Geoffrey Russell, director of Sales at Keeneland Associates, the Thoroughbred auction company. "But we're building on a good solid foundation and solid future growth."
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Buyers and sales experts say Thoroughbred horse prices depend largely on the discretionary wealth and income of the affluent and wealthy. When the wealthy took a big hit in 2009, so did horse prices. As Mike Repole, a Thoroughbred buyer and co-founder of Vitaminwater told me, "No one needs a Thoroughbred."
Now, rising stocks and asset prices are boosting the fortunes of the wealthy, along with prices of Thoroughbreds. While Thoroughbred values have not bounced back quite as much as values for art, vintage cars and other collectibles, they are doing better than sales of yachts and private jets.
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"People buy a horse when they have extra cash to spend," Russell said. "And I think right now, they have more extra cash."
Of course, they'll need even more once they buy a Thoroughbred. While some Thoroughbreds can turn out to be great investments—through winnings and high stud fees after retirement—the moneymakers are a rare exception. Thoroughbreds can cost more than $100 a day to maintain, train and keep—with high-priced insurance, veterinarian bills, feed, and stable costs all factoring into the mix.
Some horses can sell for low prices, but turn out to be superstars on the track. The famed Seattle Slew, which one the Triple Crown in 1977, was sold for only $17,500, but went on to make more than $1 million in winnings and sell for $12 million.
More common are disappointments like The Green Monkey, a colt that sold for $16 million in 2006—a world record auction price. Green Monkey failed to win any of his three first races and was retired in 2008, with a stud fee at around $5,000.
"People who come into this do it because they love the sport," Russell said. "If people have an understanding of the expectations and the risks, it's a great experience for families and a great community."
In other words, don't buy Thoroughbreds for the money.
-By CNBC's Robert Frank. Follow him on Twitter: