Resale market cooling down?

[JustTinking]

I've noticed on the broker sites, that properties that were flying off the shelves 3 months ago are now starting to sit for a while. Stripped contracts in particular are not moving quickly at all, some have been out there for 60 days or longer. Saw a couple were pulled. Inventory seems to be building and prices are starting, just starting, to inch downwards. I even see some small contracts, 50 pointers, not selling.

Dare I say it?? Are we moving towards a market more friendly to buyers?

 

[Silver19]

I think so. I watch the BWV listings daily and there is a surplus. On the other hand I've made four offers in the 70's and only one has been accepted. So the sellers are not showing me any desperation.

 

[Nabas]

The resale market is definitely cooling down. Available inventories are way up compared to the summer and many brokers are starting to slowly lower asking prices.

It's not unusual; we are getting into the slow season. Still, this spring and summer saw some crazy activity.

Any real estate tends to be highly speculative. DVC is no different.

It will be interesting to watch trends to see if we are in the new norm or if the market will swing down further. Was this year's run-up a return to normalcy or just a bubble?

 

[OKW Lover]

The PP's comments make me wonder if this is an actual long-term trend or just reflective of a regular seasonal change.

 

[JustTinking]

The PP's comments make me wonder if this is an actual long-term trend or just reflective of a regular seasonal change.

That's a great question. I haven't been watching it long enough to know...anyone else with more experience care to weigh in?

 

[e46m3]

It's definitely cooled off.

 

[Minniesgal]

I'm not sure comparing to the summer is a valid comparison. I think people's minds are on other things at this time of year. A better evaluation would be to compare with this time last year. I was looking for VCG this time last year and I had a quick look and seems to be inventory is still lower, prices may well be heading down but possibly not back to where they were a year ago.

 

[bookwormde]

cooling off compared to 3 months ago yes

compared to a year ago no it is much higher

 

[Dean]

cooling off compared to 3 months ago yes

compared to a year ago no if is much higher

My opinion is that the GF buzz was largely responsible for the increased activity and prices. I expect them to cool off a little then go back up with the Poly. After that they should cool off again back to where one would have expected them to be with the passage of time and before the increases in the last year or so. Of course other changes could affect this as well such as any additional restrictions on resale points or other programs such as possible extension offers.

 

[Nabas]

During the 2010 - 2012 period, DVC prices were down significantly.

No doubt, the economy played a factor but it also could have been because Disney flooded the market with direct-sale DVCs. BLT, SSR, and AKV more than doubled the number of DVC rooms at WDW in just a few years.

In any industry, a large increase in new inventory affects secondary markets. By 2011, many of the impulse buyers at the new resorts (timeshares tend to be impulse purchases) likely were selling, increasing available resale inventory and bringing resale prices down.

With AKV expected to sell out early in 2014, both VGF and the Poly being relatively small DVCs, and a large percentage of impulse buyers having already sold their DVC interests, there should be no great influx of properties on the resale market going forward.

Inventories at the classic DVC resorts are climbing but this might be the usual seasonal influx caused by a desire by owners to avoid paying next year's maintenance fees along with less interest among buyers due to the end of the traditional vacation season. (Right now, many potential buyers don't have vacations on their minds.)

It will be interesting if the DVC resale market retains its gains from earlier this year or declines further. Still, I don't think we'll see a return to 2011-2012 prices unless something drastic happens.

 

[Dean]

It will be interesting if the DVC resale market retains its gains from earlier this year or declines further. Still, I don't think we'll see a return to 2011-2012 prices unless something drastic happens.

I predict $40 SSR contracts passing ROFR by Jan, 2017.

 

[Nabas]

I predict $40 SSR contracts passing ROFR by Jan, 2017.

Wow, with SSR resales selling for an average $68/point in August, that would be something if it happens.

SSR is by far the largest WDW DVC resort yet remains relatively popular because of its low resale price and annual MF.

Because WDW's Cash Room Only (CRO) are so expensive, there's only so low DVCs can go.

Long-term, DVC membership should continue to retain some value as long as WDW maintains its current pricing structure at the onsite resorts. I'll use an example.

Historically, DVC Maintenance Fees (MF) and CROs from Disney have been increasing by about 3% per annum.

2013 room rates for a CRO at the Beach Club in early July (summer vacation season) were $448/night (including tax). With an annual increase of 3%, this might be $602/night in 2023 or $4214/week. Even with a 30% discount (not guaranteed, especially for the more popular times of the year), this comes out to $2950/week.

2013 MF at SSR were $4.81/point. In 10 years, this might be $6.46/point. It takes 134 points to stay in a BCV Studio for one week in July, or $866/week in 2023 MF. In 10 years, difference between renting and using DVC points might be about $2084 ($2950 – $866) per year. (It seems to me SSR members love to boast how they always are able to book elsewhere. )

Let’s assume a person wants to commit to a WDW vacation for only 5 years, a pessimistic duration given DVC's current pricing structure, and then just throw away their DVC membership, which is unrealistic. Theoretically, this person would be willing to pay up to $10,420 ($2084/yr X 5 yrs) for a 134-point DVC membership at SSR. Beyond the ancillary benefits of DVC membership, let’s assume they need a real financial incentive to purchase a DVC and to take into account other closing costs, so they’d only be willing to pay $8000 for the actual points. At 134 points, this comes out to $60/pt ($8000 / 134) in 2023.

As long as Disney does a competent job of maintaining demand for WDW and doesn't drastically change the way it prices its onsite resorts, there will always be a percentage of the population that will view DVC as a viable economic option.

P.S. Hopefully, I got the math right!

 

[Dean]

Wow, with SSR resales selling for an average $68/point in August, that would be something if it happens.

SSR is by far the largest WDW DVC resort yet remains relatively popular because of its low resale price and annual MF.

Because WDW's Cash Room Only (CRO) are so expensive, there's only so low DVCs can go.

Long-term, DVC membership should continue to retain some value as long as WDW maintains its current pricing structure at the onsite resorts. I'll use an example.

Historically, DVC Maintenance Fees (MF) and CROs from Disney have been increasing by about 3% per annum.

2013 room rates for a CRO at the Beach Club in early July (summer vacation season) were $448/night (including tax). With an annual increase of 3%, this might be $602/night in 2023 or $4214/week. Even with a 30% discount (not guaranteed, especially for the more popular times of the year), this comes out to $2950/week.

2013 MF at SSR were $4.81/point. In 10 years, this might be $6.46/point. It takes 134 points to stay in a BCV Studio for one week in July, or $866/week in 2023 MF. In 10 years, difference between renting and using DVC points might be about $2084 ($2950 – $866) per year. (It seems to me SSR members love to boast how they always are able to book elsewhere. )

Let’s assume a person wants to commit to a WDW vacation for only 5 years, a pessimistic duration given DVC's current pricing structure, and then just throw away their DVC membership, which is unrealistic. Theoretically, this person would be willing to pay up to $10,420 ($2084/yr X 5 yrs) for a 134-point DVC membership at SSR. Beyond the ancillary benefits of DVC membership, let’s assume they need a real financial incentive to purchase a DVC and to take into account other closing costs, so they’d only be willing to pay $8000 for the actual points. At 134 points, this comes out to $60/pt ($8000 / 134) in 2023.

As long as Disney does a competent job of maintaining demand for WDW and doesn't drastically change the way it prices its onsite resorts, there will always be a percentage of the population that will view DVC as a viable economic option.

P.S. Hopefully, I got the math right!

As I said before, I think where we are right now is inflated. SSR was close to $50 pp before the increase. I'm using SSR as a reference point, not singling it out. I think what you describe is the best case scenario for value retention. We'll see.

 

[Nabas]

As I said before, I think where we are right now is inflated. SSR was close to $50 pp before the increase. I'm using SSR as a reference point, not singling it out. I think what you describe is the best case scenario for value retention. We'll see.

Just remember that my example does not take into account inflation. In inflation adjusted dollars, the $60/point at SSR in 2023 might be closer to $45-48/point today.

I don't think we are that far apart, only that in terms of absolute dollars, DVC should retain value.

I am suggesting that when predicting a price many years into the future, inflation needs to be considered.

 

[mmdisneylover]

I've noticed on the broker sites, that properties that were flying off the shelves 3 months ago are now starting to sit for a while. Stripped contracts in particular are not moving quickly at all, some have been out there for 60 days or longer. Saw a couple were pulled. Inventory seems to be building and prices are starting, just starting, to inch downwards. I even see some small contracts, 50 pointers, not selling. Dare I say it?? Are we moving towards a market more friendly to buyers?

i was just looking yesterday and my question is why have the prices went so high? I wouldn't pay that much for resale. Love dvc but the resale prices are to high I will wait it out.

 

[Dean]

Just remember that my example does not take into account inflation. In inflation adjusted dollars, the $60/point at SSR in 2023 might be closer to $45-48/point today.

I don't think we are that far apart, only that in terms of absolute dollars, DVC should retain value.

I am suggesting that when predicting a price many years into the future, inflation needs to be considered.

No doubt but my prediction was barely over 3 yrs from now so the inflationary difference is marginal as is the loss of RTU on SSR and another reason I chose SSR over a 2042 option as the example. To be on par you're have to either run your numbers from that price range or from that of a couple of years ago. Time will tell, DVC may provide additional changes that will either increase or decrease the resale prices though more likely decrease them if they add additional restrictions. The other issue is that I am definitely not willing to accept that DVC will have a true value or be worth fooling with later in the RTU course. I also think that assuming the 3% inflation on fees long term is a bit optimistic and again, represents best case scenario and risk.

 

[DougEMG]

I predict $40 SSR contracts passing ROFR by Jan, 2017.

If that were to happen (which I don't think it will), I'd stock up on points at that price. Until the US economy crashes again I don't think we are going to see any significant reductions like that.

Plus shouldn't that be right about the time the Poly DVC comes out causing another spike in direct/resale prices.

At it's core, the two things that effect the resale market are the supply of contracts and the value those contracts provide.

This spring we saw a real lack of supply of resale contracts, there were times that BWV and BCV only had 3-5 contracts listed between all the major brokers. With no supply it allows sellers to increase their price, provided the value is still there. The result of that was the BWV/BCV contracts took a large jump in price, because even at those new prices, buyer saw the value in owning the contract. Now some owners see the increase in price and think that this might be a good time to sell, so the amount of listed contracts increase, but the prices don't go down because those sellers are not desperate to sell. Prices only go down when sellers are desperate or the value is no longer there. So until you see a lot more desperate sellers or the value of owning the contract decreases we aren't going to see major reductions in price.

 

[Dean]

If that were to happen (which I don't think it will), I'd stock up on points at that price. Until the US economy crashes again I don't think we are going to see any significant reductions like that.

Plus shouldn't that be right about the time the Poly DVC comes out causing another spike in direct/resale prices.

Start saving your money. I think the Poly will likely be selling by then.

 

[dmunsil]

FWIW, I haven't seen any slowdown or lowering of prices in the recorded sales. Volume is up at all resorts, and prices are up sharply at all resorts except BWV, which is a tiny bit down.

Obviously the recorded deeds are about two months out of date, so it's possible we're seeing the slowdown in the listings now, and it'll show up in the recorded deeds in a couple months.

 

[DVC Dude]

I have followed the SSR prices since pre-construction sales and I do NOT agree that the resale prices will be $40 in 2017.

The 2009-11 recession depression in resale prices was the blip, not the rule.

I predict they will stay around $60pp (+/- $10) for the next 10 years.