Dvc Point Increase Poll

[KANSAS]

what year will DVC POINTS each their maximum level and what $ per point, will that be?

 

[tiberius]

This is not an exact answer, but here goes my attempt at an analysis of this issue.
The price will be what the market supports in way of supply and demand. Disney would not have raised price to $84 if they did not believe they could sell for that price to enough people. Perhaps it is a reflection of the lessening supply remaining at the BCV(i.e. supply vs. demand). Given Disney's popularity and the success of the DVC, I do not think their share of the timeshare market is close to being oversold.

I don't see pries coming down until at least one of the following happens:
1. DVC market reaches a point of oversupply.
2. Prospective DVC buyers seriously take the 2042 reversion date into their purchase consideration. That date is still too far off for most people to seriously consider as a factor. I am sure many DVC owners see it as beyond their lifespan, and for the rest that date is probably too far off to be meaningful. For a who is DVC buyer is in their 30's, they would be 70's by then.
I am sure there is a group who can fully appreciate this reversion date, but feel they will recover the cost by that time in resort use.

 

[Dean]

The points will start to decrease in value likely before there's an oversupply of resale contracts. The issues will be when DVC stops selling, when they stop buying back contracts and the time remaining on the RTU gets much under 30 years. My guess is these will all converge about 2008-10 if Eagle Pines doesn't happen and about 2012 if it does. The final price will also depend on EP or not and will either be around $90 pp at the end for SS or $100 pp or just over for EP if it happens, these are RETAIL prices. Resale will continue to be around 75% of retail. The RTU will be the largest factor later but the least before 30 years remaining.

If EP happens and is included in DVC and has a new ending date, this may drive the resales down a little sooner, maybe back to 2010. I'm assuming EP will be the latest DVC resort if it even happens and if there were something else, that would drag out the resale prices somewhat. Not with a new and higher price but with a slower decrease early on.

 

[Poorman]

Do you think there would be a time when Disney would have a program where current DVC owners would be given the opertunity to buy into a extension of the 2042 contract? This would give the sales of new DVC properties,not the ones we now see on the drawing board but future properties,a boost at the 30 year mark. I don't know the legal ramifications of doing this. Just some food for thought. I don't know if this has been discussed before,I'm sure it has. Rich

 

[joepoe]

I did a spreadsheet last year that assumed a 3% annual inflation rate. It showed that the present value of the remaining years to 2042 would continue to rise until about 2020 or so. Therefore, theoretically, all things being equal, the price per point could rise to over $100 per point over the next twenty years. A lot can happen in the next twenty years to affect supply and demand, but at least there is a mathematical possibility that prices could continue to rise.

 

[KANSAS]

Thank u 2 all that have posted so far, fantastic answers
Thank u again

 

[Dean]

Originally posted by Poorman
Do you think there would be a time when Disney would have a program where current DVC owners would be given the opertunity to buy into a extension of the 2042 contract? This would give the sales of new DVC properties,not the ones we now see on the drawing board but future properties,a boost at the 30 year mark. I don't know the legal ramifications of doing this. Just some food for thought. I don't know if this has been discussed before,I'm sure it has. Rich

We discussed this issue I believe last summer very extensively. My guess is that if EP happens it will have a different ending date and it seems likely that some type of extension would happen. The question is whether it and the dues would be low enough to make it reasonable for current members and their families. Say an extension of 12-14 years at $20 pp.

RTU properties tend to start to lose value at just under 30 years but the dues will keep increasing, likely faster than inflation. Maybe the dues will be $104 pp by the end.

 

[vernon]

Ah the impossible question LOL. There are so many variables this is almost impossible to answer. Will Disney over supply? probably. What inflation rates should we use? who knows. Should you use other timeshares historical action as a guide for DVC? Maybe, but I think there are other actions for DVC that are more important than that last issue.

Where I feel DVC has an advantage over a lot of other timeshare systems is that it has an easy and obvious point of cost comparisom ie Disney Hotels. I calculate what I think DVC points will be worth using a likely inflation rate for Disney's other hotels. My logic behind this is, that even with just 3 or 4 years left of DVC, if you are planing to visit WDW twice in that 4 year period and your accommodation bill is going to be for example $10,000 per trip ie $20,000 total. If you can buy DVC points ( and by banking and borrowing cover all your needs) that will give you accommodation of a similar or better level than you would have paid cash for, there is going to be a value still to DVC purchases. I would think anything less than 50% of hotel room cost is going to get snapped up, somewhere in the region of 70-75% is probably a little on the high side. Ultimately, the value of DVC is going to reflect what the cost of staying on WDW paying cash is going to cost.

If you take a hotel room that at the moment costs $150 a night ( IMHO that's a reasonable guideline for a hotelroom of DVC quality including any discounts etc) and apply an inflation rate of 5% per year you come up with a cost of just over $1000 per night in 2042. Your dues using a starting cost of $4 per point and going up by the same inflation rate comes out at $27 per point. If we use 130 points as the cost for that room, which is arguably a little high your cost of dues each year is $3500 for the week, about half the cost of paying cash. On this calculation the saving of DVC over cash would be about $14000 ( $3500 per week over 4 years) or $107 per point. Obviously no one is going to pay $107 in order to save $107 but I think even at that late stage in DVC's lifespan anything less than $60 per point looks cheap.

Using an inflation rate of 8%, which was the historical figure for Disney hotels PRIOR to Sept 11 , the effects of which ( deep discounts on rooms) I think needs to be ignored for the purpose of this calculation gives you a room cost of just over $3000 a night and a dues cost of $80 per point. The dues cost of your room is about $10,000 ( again about half of your room cost) . Using this inflation rate the saving of DVC is about $40,000 ( $10,000 per week over 4 years) or about $307 per point. At that level any cost of DVC at less than $150 per point looks to offer a saving that would be worthwhile.

As Dean correctly points out, inflation is the biggest imponderable, but DVC's legal set up, in that Disney can't make a profit out of the dues, they are only to cover the cost of running the operation make me think that rises that are hugely above the rate of inflation are unlikely. The other issue that has been touched on is if/when Disney stop selling DVC, the level of marketing will obviously drop as will the level of general knowledge about the product. This lack of knowledge among the general public will undoubtably slow down the numbers of people interested in buying into DVC (through resales) but obviously there will be no supply from Disney. Again it's a question of supply and demand, both will drop in this scenario, depending on which drops the most the price will rise or fall accordingly.

 

[Dean]

Vernon, I can't disagree with your way of looking at it but would interject these thoughts. First, I think you will see the dues go up faster than the cost for the same level of resort as the DVC resorts will be at the time. I would feel that using $150 as your starting point comparing to other WDW hotel units is a little high. I think a 5% inflation for Hotels at WDW is a little high, in this case I'm not sure history is a good reflector unless we use overall inflation and not WDW inflation which is closer to 3%. The other issue would be that you'd also have to take into account the value and earnings of the DVC owner if they sold and invested the money. I also suspect the dues the last 10-15 years may be very high as Disney will want the resorts in tip top shape when they take over, at our expense.

I agree with your point that there will be a shrinking group of possible buyers, an increase in sellers and likely a decrease in venues to get the two together, even with the internet.

Buying DVC might truly be a good deal with only 4 years left but it won't be for much principal or possible for any, just pay the dues.

 

[vernon]

I would feel that using $150 as your starting point comparing to other WDW hotel units is a little high

Are you talking about moderates or the actual DVC resorts like BW, BCV, OKW and VWL? I think the price I've used is a reasonable one that's less than the best you would pick up those DVC resorts even with the discounts available but more than you would pay for a moderate ( with the best discounts available) . I've tried to counter that by using 130 points for a weeks accomodation, which is high IMHO, when you look that you can get OKW for 100 points or less much of the year. I think the two balance each other, IMHO.

The other issue would be that you'd also have to take into account the value and earnings of the DVC owner if they sold and invested the money

I don't think that makes any difference to the financial argument of buying into DVC with 4 years left. I'd be suprised if many people look to sell out with just a few years left, IMHO there's no real "return" on doing so. I can't see anyone buying unless the purchase shows significant saving on room rates, in which case people owning are going to say, we can sell this for $10,000 and spend $20,000 on hotel costs over the next 4 years, or we can vacation on a DVC resort and save $10,000. IMHO it's a no brainer. I also don't think you can play the "sell and invest card" but in the same post say that DVC will have no intrinsic value, you want to have your cake and eat it too. Either DVC will have no "real value" in which case you wouldn't have any return to invest, or you're agreeing with me that it will have a value, which granted could be invested.

I accept your right to an alternate view on inflation, it's an impossible call. I hope we're both around to know whos view was closer to the actuality LOL. You can guarantee that if we are I'll be happy to buy you dinner Dean

 

[Dean]

Vernon, I think you must look at a more broad array of rooms than just comparing to the same unit and the prices associated. You would need to look at this from the standpoint of a non member buying in for just a few years and I personally would think the moderates would be a major central focus for them. So yes, I think the moderates are a better comparison for this discussion. Even if I were to use something other than the moderates, I wouldn't use quite that high but you can look at it how you feel is best.

As to your other point, I guess I was looking at this from the central focus of the thread. That being what would the value of points be for an owner as we went along and when would they likely peak. I was taking the DVC owner and therefore sellers viewpoint rather than one wanting to buy in for just a few years. It makes a big difference to me which view point one takes. Personally I feel if one wants to get out, waiting until 4 years before the end is not smart, besides at four years out, one will likely only have 3 years worth of points left.

As to the income potential, I agree at 4 years it likely will be negligible but at 20-25 years it definitely won't be. I can personally tell you that I plan on riding the wave and then based on the issues I've already put forth here, start to pare down my DVC holdings at what I judge will be the peak. We'll see how successful that approach is.

 

[vernon]

You can pick a point anywhere along the timeline if you do a Time/value/money calculation, I used the three or four years point to illustrate that even close to the end of DVC there is a residual value that, theoretically could be quite high. My calculations have the "peak" being somewhere between 2025 and 2030 but I think the likelyhood is a little short of that date.

As Dean and I agree the biggest factors are things that you can't really quantify, it's just a feeling of how things are likely to go. I do feel though as DVC reaches 15-20 years left to run a lot of those "imponderables" will be easier to read and the type of people who were loath to buy into DVC with 40 or 50 years to run will adopt the attitude "our kids are 8 and 5, We KNOW for the next 10-12 years were are definately going to vaca at WDW at least everyother year, maybe every year therefore this looks like a good option for us". Everyone that has bought in now has to look along way into the future and their own circumstances. With less "shelf life" on DVC those choices will become easier to make. If few people now look on DVC as an investment, more as a prepaid vacation, with 12-15 years only to look at, the sums are going to be much easier and much more obvious particularly for those type of people that chose not to dive into DVC now because the commitment was a little too longterm for them.

 

[WDWguruDH]

I did some of the math before we purchased, determined break-even on the purchase in 5-7 years and a peak in price of about 25 years - the last 15 years probably seeing a decrease.

Since the real value for resale is comparing to WDW resort costs, I compared the cost of points vs resort room per night vs years left and a break even of about 18% of the time(7 years divided by 40 years left). The numbers I used were based on historical trends and they are obviously subject to change, but work for predictions. I used a 7% resort inflator(20 year historical number at Disney) and a 3.1% dues inflator(10+ year historical number with DVC). With these numbers, a deluxe room will cost about $1200 a night in 25 years and dues will be between $8-9 a point. Using the middle of the road - 1 bedroom in Choice season, 214 points a week. I won't bore you with all the numbers, but in order to maintain the 18% time break-even, you need about 14 years(break-even in 3 years) at the predicted 25 year prices. Anything beyond that and the break even point becomes longer, thus the value will decrease. All of this is for those of us buying now, those who purchase in the future, the numbers will be slightly different.

Now, take heart, because if those same numbers hold true, the decrease in resale value will be from their peak price, not today's prices - my calculations hold their value to be about $189 a point at year 25. Furthermore, my calculations show that the rental price per point would be about $70 in year 33 and $84 in year 36. So you could rent your points in one year and get your purchase price back...thus vacationing on just dues for 39 of the 40 years - What a deal!

Now this does not mean that DVC can be looked at as an investment, these numbers are speculative. 10 and 20 years are not strong historical numbers and as Dean stated, timeshares and such are looked at differently. There a bunch of micro-factors that will impact this: WDW has seen tremendous growth over the last 20 years supporting their increases, does this continue? Recent increases in DVC costs and sales are because of the weak stock market – people are more willing to pull money out at the current negative rates. Vernon's numbers are far more conservative and would reduce my figures by about 18%, but this does not impact the peak timeline, just the value.