Housing slump affecting DVC sales?

[squirrlygirl]

I did not overextend myself, I do not need to sell my house, yet I am affected by the "housing crisis". I have lived in my home for 3 years and have seen a reduction in my equity due to the glutt of foreclosed homes on the market. While in a better housing situation I may have taken a home equity loan to finish my basement and spread the finanical impact over a few years, I've had no choice but to pay cash up front as I go. This means less money for purchases such as DVC. Or, in my case, a smaller purchase.

 

[PamOKW]

It may very well effect those who were buying into DVC pretty much on all credit -- those who were kind of reaching to make the purchase. If their homes are in the same situation, DVC will go first.

On the flip side -- the Euro is doing very well against the dollar. Europeans are returning to WDW vacations. A market that had dwindled, may perk up again to pick up the slack among US buyers. Same with other overseas purchasers of DVC.

 

[tjkraz]

I don't mean to devalue all of the useful comments about the real estate market, but I think it's worth pointing out that we really don't know how that one factor fits into the grand scheme of things. It just so happens to be the hot button issue TODAY. 3-4 years ago sales were certainly still impacted by the remnants of 9/11. Other times there are factors like unemployment, the stock market, interest rates and simply overall perceptions of the economy.

I have no doubt that there are people like squirrlygirl whose buying decisions today are impacted by the real estate market. But we also need to recognize that in past months and years there were other factors that impacted other people's buying decisions.

What none of us know is how August '07 sales compare with August '06, August '05 or any other time period in DVC history.

OP's original question was whether the real estate market will force DVC to make price cuts. I think that answer to that is undeniably "no." DVC has never lowered its base prices (unless you count the periods where the lowered the minimum point purchase levels, and that was over a decade ago IIRC.) Promotional deals will certainly vary and some will be better than others. But even then it's difficult to draw any firm conclusions about promotional offers. While richer offers COULD be motivated by slow sales, they just as easily be linked to factors like DVC wanting to sell-out SSR to announce a new resort, DVC wanting to sell as many points as possible before the end of the year to lower developer's subsidies, entering what have proven to be annual slow sales periods, and so on.

While tomorrow's price may well be less than today's, I don't think we can look at the real estate market and draw any firm conclusions regarding DVC's future pricing.

 

[Anthony1971]

I just want to point out that these loans were made avialable to so maney people with poor credit because Wall street -the investors all of us- bought the repackaged loans in the form of Mutal funds, Hedge funds and stocks. In other words if you have an IRA that is in a mutual fund you will get hit with some amount of the loss most likely. The mutual funds for the most part are not the big losers for the most part there are some out there that were and will be deeply impacted (high risk high return funds) but most funds are invested in some bank that offered these type of loans.
I do not agree with the people who took these loans and did not realize...............you signed something to the oposite.
On the other side investors do bear some burden for buying these types of investments as those who loose money on that end should have done thier research as well not just seeing the high returns but also undersating the high risk.
I feel the people who took these loans are mostly to blame.....
will this have an effect on DVC...... I think we are just seeing the beginning of some hard times to come. However I doubt this will have much of an effect on the average --fixed loan non refinanced to buy or fix or??... people or those who used an ARM wisely.

 

[Anthony1971]

It seems that SSR is selling slower than expected.

Not smaller ones, like people trying to free up money to buy AK

Where did you get this info from. This is not the first time you have made these comments with nothing backing it and never returned to the thread.

Neither of these statements make sense, SSR is close to being sold out and why would all of these people sell to buy AKV some may but I am sure it is few. I bought an add on in SSR months ago and it was in the second to last building to be completed strong proof that is almost sold out.

 

[Plutofan]

The question that I would like to know if the economy goes into a recession and the stock market performs poorly will there be a lot more people trying to sell their DVCs. If there are a lot of DVCs put up on the re-sale market and people are having a hard time paying bills will they be willing to sell at reduced prices and will Disney maintain the ROFR prices at the current levels. It appears that some contracts are passing ROFR at a lower prices now than several months ago. At that point in time, if it ever happens, Disney will have to decide is it more important for DVC to retain its value by exercing ROFR at the cost of them having to stock pile excess points. One could speculate that Disney already has to many points in inventory since they are now offering double developer points. Only time will tell....

 

[PamOKW]

I agree that it's not likely we'll see DVC drop prices. In the uncertain tourism times following 9/11, they had some special offers but never dropped the price. They also went ahead with building and planning future DVC resorts during this time period.

My guess is also that if people are forced to put their memberships on the resale market at low prices, DVC will buy them back. DVC really has nothing to lose when holding points, they are still able to book the accomodations as hotel rooms.

 

[Ratpack]

Tried to warn my neighbor of this very issue. I work for a company that makes products for homes and we see the cyclical market all the time. The difference I think in this one is the loans that were going out and people wanting more for less as we always do. My neighbor was a loan processor for a local mortgage company. He was making great money, so he decided to sell his house he had only owned for a year and buy a house twice the size. He closed on that house in June. So where is he two months later, unemployed because the mortgages dropped from 30 a day to 2 and they didn't need as many people processing loans. I think it will eventually turn around. When people were getting the great loans, builders were selling so they kicked it in overdrive to get more homes on the market. Now that excess in homes is sitting there and hurting the market as a result of the loans. Once the inventory of empty homes starts to dwindle down again, things will pick back up until (God forbid we learn anything) we go through this same deal again in 5-10 years.

 

[coloradodad]

I think that the mortgage issues will absolutely affect the sales of DVC. Most of us who are members have expressed fiscal responsibility, but on occasion people inquire about how to finance, what they can pull on home equity lines, how to manage a payment along with their new mortgage.

To those people my opinion was and still is, save your money, when your time comes that you can afford it you will know. Fund your 401k, your IRA, your children's college funds. If after that you can afford to plunk down $20k with or without financing and service those payments, then consider your options.

A lot of people talk about their only regret being that they did not join sooner, and I feel the same way, except that I did not know then what I know in August of 2007, what my financial situation would be (just as I do not know in any certain terms what my future holds, but I have built a solid foundation that hopefully holds up).

Any tightening in lending policies trickles down, the question is how deep is this crisis, and are we looking a big impact, or a minor correction. Are you a bear or a bull?

 

[benjaminb13]

I hear all points of view and frustrations re: mortgages-
In my experience, I can only look at at from my story.
I came into this country with nothing - I envied those from here whose parents were able to give or help them with their first homes-
some years ago I decided the only way to realize my dream was to purchase a home- unfortunately I earned very little and could not save enough to ever make a downpayment.
Although some lenders turned me down -( this was awful - I felt singled out)
I finally found a lender to give me a 100% loan -
I rolled the dice- and worked 2 full time jobs to pay my mortgage
Luckily - when it came time to refinance the goverment had been lowering rates and property values were much better-
today my family is more secure- I feel for those who took their chances and had poor timing- If only they kept rates lower another year and foresaw this-
But- I knew what i was doing- If not for the opportunity for my first home- I could not finance my business and today still work making 15,000 /year.
In my case, the so called 100% loan was a blessing- and to this day I thank god for the one lender who took a chance on me- There are many like myself- Although we dont speak up much -because being righteous about this problem doesnt solve the issue. I hope that this allows others to understand why some people like myself will take the 100% loan-

 

[dwelty]

Disney has recently opened the sales center in Chicago and has filed permits to build a model in California. These are not signs of a company slowing down or not growing.

I agree with all of your points. The model in California is already there.It was built in 2006 and modeled after SSR. The permits that were just filed are to remodel to match the new DVC at the Grand Californian. (At least this is our conclusion since the contractor who is building the DVC units is the same one who is listed as the contractor on the remodel permit)

 

[Anthony1971]

I hear all points of view and frustrations re: mortgages-
In my experience, I can only look at at from my story.
I came into this country with nothing - I envied those from here whose parents were able to give or help them with their first homes-
some years ago I decided the only way to realize my dream was to purchase a home- unfortunately I earned very little and could not save enough to ever make a downpayment.
Although some lenders turned me down -( this was awful - I felt singled out)
I finally found a lender to give me a 100% loan -
I rolled the dice- and worked 2 full time jobs to pay my mortgage
Luckily - when it came time to refinance the goverment had been lowering rates and property values were much better-
today my family is more secure- I feel for those who took their chances and had poor timing- If only they kept rates lower another year and foresaw this-
But- I knew what i was doing- If not for the opportunity for my first home- I could not finance my business and today still work making 15,000 /year.
In my case, the so called 100% loan was a blessing- and to this day I thank god for the one lender who took a chance on me- There are many like myself- Although we dont speak up much -because being righteous about this problem doesnt solve the issue. I hope that this allows others to understand why some people like myself will take the 100% loan-

I am happy this loan worked for you as I know it has worked for many.
Although loans like this can be a risk they are not 100% where the problem is as you were tunrned down by some indicating there was still some legitimacy to your loan.
There were loans made with no documenation to income or anything else and from articles I have read they even found one signed Mickey Mouse...... There were many who took a loan they knew they could not make paymnets on if when the interest rate changed and many of these loans were interest only loans with no payment towards the principal making owning a house cheaper then renting. So why not. I do not 100% blame every borrower --I wish you success... There is plenty to say about the brokers as they got $$$$ for making these loans but every person needs to understand what they are signing... and i would suspect a lot did but figured what does it matter if I lose the house 3 years from now it is cheaper then renting and now the Gov't talking about stepping in a lot will jump on the band wagon and look to extend the cheap rent. Again there are many like yourself who used high risk loans correctly but there are also a fair amount that did not.

 

[Anthony1971]

As far as all of this having an effect on DVC sales I am sure it will. As far as them lowering prices I doubt it. I would suspect that the majority of owners can afford the loan or one time payment made to buy DVC. I am sure any distress resale contracts will get sold. If you offer your contrcat at a few dollars less than everyone else it will get bought or ROFR and you will get your money. Your other option is to rent which would easily cover your MF and most if not all of the morgage payment if it is a ten year loan. Some will lose thier purchase but I doubt it will be enough to have an effect on dues as Disney has many opptions when they own the points.

 

[crisi]

I doubt it will lower prices. DVC can scale their supply to meet their demand - they can slow the building of new properties. They can also increase demand - I'd argue that putting a sales center in in Chicago is a sign that they want to increase demand - either because things are going great and they want them to go better - but its also possible that things are going slower than they'd like and now they are taking steps to increase demand further. But they won't lower prices to increase demand, they will just control supply to maintain prices.

However, anyone who thinks that sub-prime mortgages are only going to affect the people who took them out is not seeing the whole picture. This is a replay of the S&L crisis - and that had wide ranging impact we have just stopped seeing the effects of (Accelerated Depreciation schedules that were put in place partly as a result of the S&L crisis have just timed out fairly recently). This has affected the stock market. It affects the amount of capital in play. That means it could affect the size of the raise your company can afford to give you this year. Combine that with something like higher energy costs, higher food prices - and this could easily be a contributing factor to a recession. And that may mean more people lose their jobs - some of those people will be DVC members who can't continue to own under the pressure of job loss - even if they didn't have anything to do with a sub-prime mortgage.

On the other hand, people could react to this with a little blip and move on with their lives - the economy is a hard thing to predict.

 

[benjaminb13]

I am happy this loan worked for you as I know it has worked for many.
Although loans like this can be a risk they are not 100% where the problem is as you were tunrned down by some indicating there was still some legitimacy to your loan.
There were loans made with no documenation to income or anything else and from articles I have read they even found one signed Mickey Mouse...... There were many who took a loan they knew they could not make paymnets on if when the interest rate changed and many of these loans were interest only loans with no payment towards the principal making owning a house cheaper then renting. So why not. I do not 100% blame every borrower --I wish you success... There is plenty to say about the brokers as they got $$$$ for making these loans but every person needs to understand what they are signing... and i would suspect a lot did but figured what does it matter if I lose the house 3 years from now it is cheaper then renting and now the Gov't talking about stepping in a lot will jump on the band wagon and look to extend the cheap rent. Again there are many like yourself who used high risk loans correctly but there are also a fair amount that did not.

Thanks,
You are right. I know quite a few people who figured they would buy a house with no money- if property values went up- great --if not they walk. and rent.
Im sure that Brokers mad money but - I also understand that a lot of different people charge a lot of money- Doctors, Car sales men, mechanics-(If a person oesnt know how to work on his/her own car - good luck- the jacked-up rate costs them a fortune) real estate, time share developers- the list goes on- its capitalization( is that the word?)
Mickey Mouse??? Thats quite a story- Someone signed a document in front of a notary- and they both missed Micky- Thats Goofy-- HA_HA

 

[Anthony1971]

However, anyone who thinks that sub-prime mortgages are only going to affect the people who took them out is not seeing the whole picture.

There be rough seas ahead.

I said this earlier we are all going to pay for this. But the sad part is a lot of people walked away with a lot of profit form making these loans and will keep it.

 

[coloradodad]

However, anyone who thinks that sub-prime mortgages are only going to affect the people who took them out is not seeing the whole picture.

Ed Zachary. (exactly)

My point before is not a comment about those who fully levereged themselves to get into a home, it is about spending for things that one cannot afford by financing with easy to obtain loans. As too many people are finding out, just because you qualify, does not mean you can afford it.

mg

 

[BWV Dreamin]

I doubt it will lower prices. DVC can scale their supply to meet their demand - they can slow the building of new properties. They can also increase demand - I'd argue that putting a sales center in in Chicago is a sign that they want to increase demand - either because things are going great and they want them to go better - but its also possible that things are going slower than they'd like and now they are taking steps to increase demand further. But they won't lower prices to increase demand, they will just control supply to maintain prices.

However, anyone who thinks that sub-prime mortgages are only going to affect the people who took them out is not seeing the whole picture. This is a replay of the S&L crisis - and that had wide ranging impact we have just stopped seeing the effects of (Accelerated Depreciation schedules that were put in place partly as a result of the S&L crisis have just timed out fairly recently). This has affected the stock market. It affects the amount of capital in play. That means it could affect the size of the raise your company can afford to give you this year. Combine that with something like higher energy costs, higher food prices - and this could easily be a contributing factor to a recession. And that may mean more people lose their jobs - some of those people will be DVC members who can't continue to own under the pressure of job loss - even if they didn't have anything to do with a sub-prime mortgage.

On the other hand, people could react to this with a little blip and move on with their lives - the economy is a hard thing to predict.

So what do you think the affect would be if current DVC owners just started walking away from their financial responsibilites...ie: dues, timeshare payment, etc.? What if Disney suddenly had a flood of contracts now flooding them like the banks have with defaulted mortgages? So yes, they can turn around and resell them, but I'm sure there are fewer buyers right now for timeshares as are for homes. If Disney has this glut of newly aquired contracts, what pressure does that place on current DVC members? Any comments appreciated.

 

[crisi]

So what do you think the affect would be if current DVC owners just started walking away from their financial responsibilites...ie: dues, timeshare payment, etc.? What if Disney suddenly had a flood of contracts now flooding them like the banks have with defaulted mortgages? So yes, they can turn around and resell them, but I'm sure there are fewer buyers right now for timeshares as are for homes. If Disney has this glut of newly aquired contracts, what pressure does that place on current DVC members? Any comments appreciated.

My guess - they'd take advantage of lower bookings to do maintenance from their capital reserve - closing down parts of the resort - unless they really think this is a long term deal in which case they might do some tempting price promos - but I think they are more likely to hunker down - we didn't see a lot of breaks following 9/11 for DVC membership. They might scale back their building - and if it gets bad enough they might close some floors/parts of floors/buildings at some of the resorts. Maintenance costs would go up for all of us as well. They might do more promotions targeted differently - as someone said, the Euro is doing well right now and targeting promotions towards Europeans (or Latin Americans - the richest man in the world now is Mexican) might be worth trying.

They will only take drastic measures if they think there is a long term economic downturn (a depression rather than a recession). Any recession they'll try to ride out.

 

[coloradodad]

Reserves. I am sure there business model accounts for most plausible conditions in the economy.