News Break !! Dvc Resale ,Prices Now Dropping Fast

[pmcpmc]

when will we see this headline in the forty year cycle.
one for the accountants .

 

[DebbieB]

That depends on how long DVC keeps the resale market up by exercising it's right of first refusal on low price resales. Right now they have waitlists for current members to buy from them at sold out resorts, so they take any deals that are priced too low and resell at $84. My guess is it will be gradual, not "drop fast". Another thing is they don't want resales to drop so low that people buy there instead of buying SSR.

 

[Happy Birthday Cat]

That headline will appear soon after the one that reads....

"DVC announces it will no longer build any more resorts and is all sold out of its present resorts"

That is when they will stop keeping the resale market inflated.*


*As an academic, I have to credit Granny for the origins of this theory. I just agree strongly with him, but he did write it first.

 

[Granny]

HB Cat...nice of you to give me credit for that theory...but I have a feeling that it was espoused before I joined these boards a couple of years ago!

Taking the other assumption...that is, that Disney continues to build DVC resorts and continues to prop up the resale market through active ROFR....


...under that scenario, I think that prices for resales would start dropping when they get to 20-25 years left on the right of use. Or if Disney goes to a DVC III with an even later end date. Right now, 12 years is not a huge spread when considering 50 years vs 38 years. But when it's 37 vs 25 years, I think it will begin to impact pricing substantially.

Just a thought...we'll see.

 

[Desperado]

Originally posted by pmcpmc
when will we see this headline

Or the headline "Post subject lines matches the content of the thread discussions on DIS". Have to admit, you caught me with your thread title, oh well, happy posting.

 

[tixx]

if that EEE virus from mosquitos ever really spread ... ps i found that cya letter from Disney in my room last week


EEE Florida info link

 

[OneMoreTry]

Originally posted by Happy Birthday Cat
That headline will appear soon after the one that reads....

"DVC announces it will no longer build any more resorts and is all sold out of its present resorts"

If price really depends on supply and demand, then I think this announcement could have the opposite effect. If demand remains high then DVC won't have to "keep" the price inflated. Resale agents may have to market more aggressively to maintain the demand however. It's obvious there are plenty of people willing to pay the "inflated" prices now.

I think the two most important effects on price will be

1. The continued popularity of WDW as a vacation destination.
2. Time to expiration.

 

[Granny]

Originally posted by OneMoreTry
If price really depends on supply and demand, then I think this announcement could have the opposite effect. If demand remains high then DVC won't have to "keep" the price inflated. Resale agents may have to market more aggressively to maintain the demand however. It's obvious there are plenty of people willing to pay the "inflated" prices now.

I don't think there's much doubt that without ROFR, you could get a DVC resale for much cheaper right now, with demand at a high level. It's an artificial price support which keeps the resale prices high. That's good for those of us who have finished buying points and it provides a nice fall back position if we have to sell (heaven forbid!).

And keep in mind that the reason that Disney would quit building is because the profitability wouldn't be there. As long as DVC sells like hotcakes, they'll keep building.

But if they see demand start slacking off, they'll stop. So tied into the assumption that prices will drop when Disney quits building is the assumption that they will quit building because they don't see the demand high enough to continue.

 

[chips]

Rofr does artificially inflate the resale prices. RTU will eventually effect the value. However if it continues to be possible to rent the points and there is solid demand for disney luxury accommodations versus supply. the price per point will be supported by the tax free yield. If disney aggressively tries to eliminate the rental of points or disney overbuilds the luxury market and the price for the rooms plummets, this could be a problem.

However if you assume you own the points at 4 dollars per point(the maintenance) and you could rent them for ten the yield is 6 dollars per point/purchase price. If you assume70 per point the tax free yield is 8.5 percent. which at full taxation is about 14 percent taxable yield. In the current investment climate these are favorable returns.

If price per point went to 50 and the maintenance and rental remained the same the tax free yield would go to 12 percent. At that price this starts to look like an investment not just a prepaid vacation.

This would be a high junk bond yield with very little chance of default.


This would also increase the number of absentee owners and would negatively effect the atmosphere. I would hope this is a worse case scenario.

I think a more pressing problem will be getting reservations if ssr buyers want to reserve non ssr properties. I think the price problem is not immediate.

What if the economy turns around? These memberships are selling well in a difficult environment.

 

[Mouse Ears]

Along the lines of what chips is saying, my model showed the Present Value (PV) of future cashflows for points purchased would begin to go down about 14-18 years from the end of the lease period. So, that means that the resale prices should continue to drift up till around 2025 or so.

This does ignore the effects of competition from Disney and any demand/supply effects such as Disney overbuilding and changing the perceived value of a deluxe room reservation. This is based purely on a constant increase in value for the resort reservations.

Anyway, it's an interesting question.

 

[OneMoreTry]

Originally posted by Granny
I don't think there's much doubt that without ROFR, you could get a DVC resale for much cheaper right now, with demand at a high level.

...

I think there is doubt.

AND if you eliminate the option of buying from Disney (which huge numbers of people inexplicably now choose in spite of the cheaper prices of resale I guess because it's so "magic") there are going to be lots of people willing to pay higher prices for getting a piece of resale DVC.

I think Disney's investment in the parks and resort in general will effect prices more than their continued investment in more DVC properties. Economically, more availablity should drive the price down in the long run.

AND even if they stop building, they will possibly continue to exercise their ROFR to profit from whatever the market will provide.

 

[Canadian Tom]

Hello: Another point to consider is Disney only exercises ROFR if there is a profit in it for them. So, with waiting lists and people willing to pay more, smart seller should be asking more, not less. The price is demand driven for each individual resort. Take a look at the resales, see any BCV for sale, no. Why the demand exceeds the supply with or without Disney's ROFR. Some of the other resorts have and will experience a decrease in price because of the lack of demand and over-abundance of supply, example Vero beach. Too many sellers and too few buyers. If I owned Vero beach I would remove the listing and concentrate on renting my points. This would decrease the supply of resales and increase the price. Profits or lack of losses are made by people with patience and persurverance(sp?). Don't listen to anything I just said, I'm looking for BCV points on resale, so keep those prices going down.

Another way to look at this is: After about 10 years of vacations you have used up your initial investment. So anything above the maintainance cost is pure profit. Price would have to drop like a stone( to $3-4 per point) to put you in a loss posotion. What do you think the chances of that happening.

I would have to agree with the person who said the biggest concern is not the dropping point prices but the lack of ability to book at the 7 month window as new members enter. I hope Disney does not put anymore resort off the WDW site because that increases the number of members who want WDW but bring some other location to trade that I/we don't want. Sorry I'm starting to ramble goodbye. Canadian Tom

 

[Kick it up a notch!]

I didn't buy to worry about how much it was worth now or in the future. I just want to know how many times my 600 points will let me enjoy the magic!!!

 

[Shamus]

DVC Resale Prices Start Dropping Steadily
You'll see that headline around 2025.

DVC Resale Prices Now Dropping Fast
Fast is a relavent term, but ...You won't see that one until around 2032.

This is IMHO of course, however, the caveat is I did do price forecasting for a major Financial firm a few years back. The Major assumptions in my opinion (calculations) ... a Healthy Long Term National Economic Growth Rate, and the same parallel growth for the WDW micro economy (WDW popularity). The driving factor ..... WDW Hotel Prices........of course.

Along the lines of what chips is saying, my model showed the Present Value (PV) of future cashflows for points purchased would begin to go down about 14-18 years from the end of the lease period. So, that means that the resale prices should continue to drift up till around 2025 or so.
Looks like threre are at least three of us in that boat Mouse Ears.

As Canadian Tom and One More Try point out..............Disney's ROFR may be holding the bottom for Resales, but their current sales are capping the Top"


Shamus

 

[Canadian Tom]

Well said Shamus. Another point: It is totally inconsequential what the resale price is if you never sell. Now buying - that's a different question. Keep that price coming down, i need more points.

 

[vernon]

I would agre that the over-riding factor on DVC price is hotel costs in WDW. While I follow and agree with Shamus's logic I'm not even conviced that with 10 years left to run the "absolute" price of DVC would be dropping at all let alone quickly. Certainly if you were to cover that by saying "in terms of purchasing power to the 2004 $, the price taking into account inflation is dropping" but most people will look at the $ price and if that price sticks at say $75 per point the view of most people will be that the price is stationary.

If for example in 2040 a hotel room at a mod is running at $1000 a night and dues are running at say $30 per point (making a rough guide that a DVC room at 8-12 points "cost" just paying dues is in the region of $250-$400 a night mid week) . If DVC saves you $600 + a year ( over three years ) for a medium of 10 points purchased if you can buy those points at $75 per point it looks like a decent deal to me. Although at that late stage I think renting points out that you couldn't use yourself would be the better return for the owner.

As Canadian Tom and One More Try point out..............Disney's ROFR may be holding the bottom for Resales, but their current sales are capping the Top"

Very valid point.

 

[joepoe]

Originally posted by Mouse Ears
Along the lines of what chips is saying, my model showed the Present Value (PV) of future cashflows for points purchased would begin to go down about 14-18 years from the end of the lease period. So, that means that the resale prices should continue to drift up till around 2025 or so.

My PV calculations are very close to that as well. My model shows prices going up slower than what DVC has been raising them, so demand must still be very high. DO you see the same thing?

 

[Mouse Ears]

joepoe-

The prices have gone up faster than I expected. That's why I bought last summer even though we couldn't make a trip until this Dec.

I since adjusted my assumptions for hotel price increases and my return rate to come closer to match the overall trend since beginning in 1992. I believe that part of the reason we see this fast increase is that the prices honestly started too low. They are probably getting closer to the market price now and the offsite choices are no longer holding back the increases.

Still, the assumptions don't make a huge difference in where things top out and start back down. It will be somewhere around 2025. It could start sooner if some people anticipate the turnaround and start selling ahead of the curve.

The human factors are hard to account for, but the math is pretty straightforward. The dollar value will continue to increase for many years if the product stays top-notch.