David Hockney's massive 1966-67 double canvas Beverly Hills Housewife brought an artist's record and the high price of the recent New York contemporary series when it sold at Christie's for $7m (£5m) plus buyer's premium.

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Sotheby's $40.1m (£29.3m) sale on May 5 was the smallest New York contemporary auction since May 2003 and down 87 per cent on last year.

Bidding was consistently thin, especially for anything more than $1m, with investors now wary of what has proved a highly volatile asset class. But 39 of the 48 lots were sold which was testament to what Tobias Meyer, the worldwide director of Sotheby's contemporary art department and the evening's auctioneer, described as "a recalibrated market".

Jeff Koons'Baroque Egg with Bow (Turquoise/Magenta) was part of the artist's Celebration series which includes the Balloon Flower (Magenta) sold by Christie's in London last June for £11.5m and the hot-pink Hanging Heart (Magenta/Gold) which sold for $21m (£10.5) in November 2007 at Sotheby's in New York. Here, the 7ft (2.13m) blue and pink Easter egg, entered for sale by the hedge fund manager Daniel Loeb, who bought it from Gagosian in 2004 for around $3m, was here estimated at $6m-8m.

It was a relatively modest sum but Larry Gagosian, the Manhattan dealer who represents Koons, was the winning bidder at $4.8m (£3.4m).

"There are a number of people who have serious investments - emotional, art historical and financial - in Jeff Koons," commented New York art adviser Cristin Tierney after the sale. "It had to sell."

Greek industrialist Dakis Joannou, who established the Deste Foundation for Contemporary Art in Athens in 1983, sold two major works that had received undisclosed 'irrevocable' bids from a third party prior to sale. This was a less risky move than the guarantees that proved so costly in the last round of contemporary sales.

Joannou's consignment included a 1988 self-portrait by German artist Martin Kippenberger, whose retrospective at New York's Museum of Modern Art closed just a day before the sale. The artist's 1988 Untitled attracted two bidders, selling to Zurich dealer Iwan Wirth for $3.6m (£2.6m), or more than double the artist's previous record.

Genuine competition broke out for the early Alexander Calder standing mobile Ebony Sticks in Semi-Circle from 1934. Pitched at $1m-1.5m, five bidders took it to $3.05m (£2.2m).

The following day Christie's offered 54 contemporary works estimated to fetch a total of $71.5m-104.5m, again a vastly diminished offering in both volume and price levels. The sale totalled $80.9m (£57.8m) with only five failed to find buyers. The equivalent sale a year ago brought $294m (£158m).

But there was certainly more action at Christie's than there had been the night before, a different face of the market that reflected the inclusion of predominantly classic post-War works, particularly the 20 paintings, drawings and sculptures from the estate of Betty Freeman. The Los Angeles arts patron, who died in January at the age of 87, collected Abstract Expressionism and Pop Art from the 1950s. Many of these works were on the secondary market for the first time.

A rare early painting by Sam Francis from 1954, entitled Grey, which went above its top estimate to sell at $3.2m (£2.3m), was first exhibited in Dorothy Miller's seminal 1954 MoMA show Twelve Americans and was acquired by Freeman directly from the artist with whom she enjoyed a long friendship.

Freeman herself was the subject of David Hockney's 1966-67 Beverly Hills Housewife- one of the best-known acrylics from the so-called California Dreaming series. Hockney's massive double canvas, which measured 12ft long by 6ft high (3.66 x 1.83m), showed a tanned Ms Freeman standing in a long pink gown on the patio of her home. It brought a record $7m (£5m) - comfortably within the $6m-10m estimate. The previous record for Hockney was the £2.6m bid for The Splash at Sotheby's Bond Street in 2006.

At the height of the contemporary boom in February 2007, Sotheby's sold Peter Doig's 1990 oil White Canoe for a remarkable £5.1m, a price that has since proved difficult to replicate. Nevertheless, aided by a retrospective at Tate Britain last summer, his Night Fishing, a 1993 painting of a lone fishing boat at dusk, sold to Victoria Gelfand from the Gagosian Gallery for an above-estimate $4.1m (£2.9m).

Phillips de Pury struggled with their Part I contemporary sale on May 14. Despite the input of works from the collection of Charles Saatchi, the sale struggled to bring half of its $12.2m-17m estimate, with 12 of the 43 lots unsold. The top lot at $900,000 (£643,000) was Philip Guston's 1975 Anxiety.

By Roland Arkell