Projecting future resale values

[havoc315]

No it's called the economy and there being a recession going on multiple months with no letting up.

We aren’t in a recession, at least not yet. For the last year, travel has been booming.
Disney has seen record per capita guest spending.

Regardless… even if we were in a recession, it’s still saturation for the market conditions.

I just think its funny how you try to spin all of this.

Again I will point out Disney added a small percentage of new points and only 1% of those will hit resale on an annual basis. To say additional demand doesn't absorb that is funny.

Funny? It’s a fact. The market didn’t absorb the additional resale without lowering the price. It’s a fact that re-sale prices have gone down over the last year.

I expect that trend to continue over the next 3-5 years— flat/downward prices in constant dollars. If you don’t agree, that’s fine. But it’s a fact that it’s been happening over the last year.

Resale is always based on what direct prices are. As long as Disney doesnt start decreasing direct prices resale will be fine.

Direct prices have gone up in the last year. Re-sale prices have dropped in the last year. So your “always” rule has already been proven false.

 

[AvidDisReader]

Are we in a recession? If you go by the traditional definition, yes we are. I know there are those who want to change the definition, but that sounds like a political move rather than reality. I work for a major Bank that has just laid off a sizeable number of employees. My understanding is that several major companies are quietly doing the same. Unemployment will start to creep up. There is new phenomenon that I have never seen before. Companies posting jobs, but never filing them even when people apply.

 

[havoc315]

Are we in a recession? If you go by the traditional definition, yes we are. I know there are those who want to change the definition, but that sounds like a political move rather than reality. I work for a major Bank that has just laid off a sizeable number of employees. My understanding is that several major companies are quietly doing the same. Unemployment will start to creep up. There is new phenomenon that I have never seen before. Companies posting jobs, but never filing them even when people apply.

Most economists agree we aren’t in a recession yet. There is no one conclusive definition. Hard to say we are in a recession when unemployment is at/near record lows.
And my company is posting jobs.. and not filling them because we can’t get applicants. We desperately want to hire, but there are so few people looking for work right now.

Most economists do believe unemployment WILL rise, and a recession is coming in the near future. So it’s just semantics whether we are in one right now, if it will be in a few months.
Hard to say it’s a recession yet when companies are still posting record profits. The travel industry specifically has been soaring. But as the Fed keeps raising rates, a recession will hit — things will slow down.

So if you believe we already are in a recession… then we are near bottom now, and things will get better soon. If you believe we aren’t in a recession yet, then things are going to get worse before they get better. The economists I most respect project recession in 2023, unemployment over 5%, economy stabilizing by 2024.

 

[AvidDisReader]

Most economists agree we aren’t in a recession yet. There is no one conclusive definition. Hard to say we are in a recession when unemployment is at/near record lows.
And my company is posting jobs.. and not filling them because we can’t get applicants. We desperately want to hire, but there are so few people looking for work right now.

Most economists do believe unemployment WILL rise, and a recession is coming in the near future. So it’s just semantics whether we are in one right now, if it will be in a few months.
Hard to say it’s a recession yet when companies are still posting record profits. The travel industry specifically has been soaring. But as the Fed keeps raising rates, a recession will hit — things will slow down.

So if you believe we already are in a recession… then we are near bottom now, and things will get better soon. If you believe we aren’t in a recession yet, then things are going to get worse before they get better. The economists I most respect project recession in 2023, unemployment over 5%, economy stabilizing by 2024.

We can agree to disagree. The traditional definition of a recession is 2 straight quarters of negative growth, which happened in the first and second quarters of this year. Your statement regarding if you believe we are already in recession then we are near bottom is just not accurate. We can always go from a recession to a depression, which is a lot worse. As I have grown older (and older lol) I find I have less and less confidence in those in charge on knowing what they are doing and how to fix the problems causing our economic problems (Not political as both parties appear to be equally clueless).

 

[havoc315]

We can agree to disagree. The traditional definition of a recession is 2 straight quarters of negative growth, which happened in the first and second quarters of this year. Your statement regarding if you believe we are already in recession then we are near bottom is just not accurate. We can always go from a recession to a depression, which is a lot worse. As I have grown older (and older lol) I find I have less and less confidence in those in charge on knowing what they are doing and how to fix the problems causing our economic problems (Not political as both parties appear to be equally clueless).

It's a recession when the NBER declares a recession.. they have traditionally used the 2-straight quarters of decline.
But that's all just semantics.
Whatever you call it -- The facts are that indeed, the economy has shrunk for 2 straight quarters. Also a fact that unemployment is at/near record lows. That travel has been booming for the last year.
Economists disagree in terms of projecting in the future -- There are optimists projecting a "soft landing" where we won't see any significant increase in unemployment, no significant shrinkage of the economy.
But the consensus is that we are headed towards a true recession -- Unemployment over 5%, more significant shrinking of the economy.

Politically, I don't think there really is a difference between saying, "we are currently in a recession" vs "we are sliding towards a recession and will almost certainly be in one soon."

 

[Craho]

Right, so as the 2042s start to age out, they start to look even tastier to people who don't want to have this thing for decades and don't have 30K to do this. And they will hold value. Right now, there is no 8 year DVC option. If there were one, it might have been the option I took.

If I could do it again, I would have bought BLT points over SSR. I didn't appreciate how easy it is to rent and how valuable the booking categories are. Right now, I would have a hard time telling anyone to buy. But not because I think a couple hundred Poly rooms in a couple years are going to overwhelm the system. That makes zero sense to me.

I just bought a Boardwalk contract for this very reason. I don’t want to have a contract for more than 20 years. I’ll be 67 and ready to move on. Also, I don’t think it’s out of the question to sell it if, in 2032 I want to sell even though there will only be 10 years left. I think a short contact at a very reasonable price might appeal to some people. Not everyone wants to pay 50 years of MF’s.

 

[Sandisw]

I just bought a Boardwalk contract for this very reason. I don’t want to have a contract for more than 20 years. I’ll be 67 and ready to move on. Also, I don’t think it’s out of the question to sell it if, in 2032 I want to sell even though there will only be 10 years left. I think a short contact at a very reasonable price might appeal to some people. Not everyone wants to pay 50 years of MF’s.

It definitely can make sense. The key will be how many other owners think that way and whether the market is flooded with 2042 owners wanting out.

If there are way more sellers than buyers who want only a short term contract...price will take a hit. But, prices on those contracts is already coming down so people could get in now at a reasonable price and the value won't matter as much.

I will not be surprised to see sellers letting them go really cheap just to get out of paying the MF's since they don't want it any more.

 

[havoc315]

There is always much discussion about resale expectations.... Will restrictions hurt the resale of Riviera, when will 2042 resorts really start to see their resale values decline..

And I'd point out, that resale values have mostly been flat in the last year, which is a real dollar decline. (If you bought a house in 1975 for $30,000 (which would be a really nice house in 1975), and it was only worth $50,000 in 2022, then the real dollar value has declined... since the increase didn't keep up with inflation).

Anyway, I believe we are entering a negative period for resale values, not just at restricted resorts or 2042 resorts. Resale pricing is mostly set by free market supply and demand. The caveat being ROFR. Disney isn't actually setting a "floor" with ROFR, they are simply buying the cheapest contracts set by the free market -- that doesn't exactly create a floor, but it does boost demand and provide a boost to prices because of the increased demand.

Back to supply and demand: Disney has tight control over the supply of direct points. They decide when to build and sell a new resort. They can add more direct points to the market using ROFR, foreclosures, etc. They can reduce the number of direct points on the market by using DVC properties for cash bookings.

On the other hand -- The supply of resale is always going up. Each time they build a new resort, it increases the supply of resale. The older DVC owners get, the more likely they are to re-sell their points.
So there may be some month to month fluctuation, but in the long term, the number of resale contracts on the market is always increasing.

If demand isn't increasing in line with the increase in supply, prices will drop. Disney artificially reduces the demand for these resale contracts with various restrictions: the resale restrictions on Riviera, the inability of legacy resale to use Riviera and future resorts, blue card perks, etc. But even without these drawbacks, eventually the demand for DVC can't keep up with the ever increasing supply. We hit a saturation point.

Are we at the saturation point now? If not, we will be within the next 2 years;

I started this thread about 5 months ago. Whether the reasons were correct or not, we have clearly hit a point of market reflection, with the supply of re-sale exploding and prices dropping significantly.

The big question is whether this is a temporary correction or an ongoing long term trend.

Some updated thoughts:

1 -- Economic uncertainty and increased interest rates are significant drivers of the current downward pricing, in addition to factors I believe I cited. These aspects may indeed be "temporary."
2 -- The huge increase in available supply will take a long time to clear out. Many sellers (and brokers) have not adjusted to the new reality. I see sellers still hanging on for $160 per point at BCV -- Those prices may never return.
3 -- I suspect we will see a growing divergence between the 2042 resorts and the long contracts. I think the pricing of the longer term contracts will stabilize, potentially start increasing again (with inflation). While I suspect pricing of 2042 contracts will continue to stagnate and decline. Each step we get closer to 2042, more buyers will second-guess those shorter contracts. They will remain appealing where the price is right, but the right price will gradually decline.
4 -- The saturation of re-sale might start to impact direct. Where you can get re-sale points at $90 to $120 per point... Can Disney keep increasing direct pricing by 5-10% per year? They benefit from the fact that most buyers are ignorant of the resale market. But at some point, the price differential just becomes too great. This may further push Disney into making Poly2 a new restricted association. So that people who want to stay at Poly2 have to buy $220 direct points instead of $120 resale points.
5 -- We've seen Disney offer significant direct discounts at BLT and other sold-out resorts. This suggests the supply saturation is being felt at all levels. Therefore, Disney may not be using ROFR much for a while. Without ROFR supporting a floor, we will continue to see declining prices.

I do not expect resale to become worthless. But we are in a period of a significant correction.

 

[Cyberc1978]

I started this thread about 5 months ago. Whether the reasons were correct or not, we have clearly hit a point of market reflection, with the supply of re-sale exploding and prices dropping significantly.

The big question is whether this is a temporary correction or an ongoing long term trend.

Some updated thoughts:

1 -- Economic uncertainty and increased interest rates are significant drivers of the current downward pricing, in addition to factors I believe I cited. These aspects may indeed be "temporary."
2 -- The huge increase in available supply will take a long time to clear out. Many sellers (and brokers) have not adjusted to the new reality. I see sellers still hanging on for $160 per point at BCV -- Those prices may never return.
3 -- I suspect we will see a growing divergence between the 2042 resorts and the long contracts. I think the pricing of the longer term contracts will stabilize, potentially start increasing again (with inflation). While I suspect pricing of 2042 contracts will continue to stagnate and decline. Each step we get closer to 2042, more buyers will second-guess those shorter contracts. They will remain appealing where the price is right, but the right price will gradually decline.
4 -- The saturation of re-sale might start to impact direct. Where you can get re-sale points at $90 to $120 per point... Can Disney keep increasing direct pricing by 5-10% per year? They benefit from the fact that most buyers are ignorant of the resale market. But at some point, the price differential just becomes too great. This may further push Disney into making Poly2 a new restricted association. So that people who want to stay at Poly2 have to buy $220 direct points instead of $120 resale points.
5 -- We've seen Disney offer significant direct discounts at BLT and other sold-out resorts. This suggests the supply saturation is being felt at all levels. Therefore, Disney may not be using ROFR much for a while. Without ROFR supporting a floor, we will continue to see declining prices.

I do not expect resale to become worthless. But we are in a period of a significant correction.

Where are you seeing the re-sale prices going short term?
You mentioned BCV and I too see them at $160 which is absurd but I also see them at $130 according to the ROFR

/C

 

[RichVIII]

4 -- The saturation of re-sale might start to impact direct. Where you can get re-sale points at $90 to $120 per point... Can Disney keep increasing direct pricing by 5-10% per year? They benefit from the fact that most buyers are ignorant of the resale market. But at some point, the price differential just becomes too great. This may further push Disney into making Poly2 a new restricted association. So that people who want to stay at Poly2 have to buy $220 direct points instead of $120 resale points.

^ this is what I ponder most. The price increases have been fairly regular and clearly the data supported it until now. Even a die hard resale person like me went direct when the delta was very small, especially for a small contract. With buy in over 30K now, how many people eating a Mickey ice cream bar can those booths keep drawing in during this economic environment? I wanted to add on another small CCV but you can’t buy under 50 so I will probably buy a resale now for 50 and have spent less and Disney didn’t earn anything. They are making it harder for even current members to justify even smaller contracts, which I know many use to continue to grown their membership. I still kick myself when we had the chance to buy CCV when it first opened, we even took the checkbook and I didn’t pull the trigger.

I also agree, this market may force their hand to put Poly2 in a new association. I wish we had a sense, over time the delta between direct and resale. When purchased, it was about $40 pp. Now, it Is closer to $100, without the benefits they tout. And look, if Star Cruiser is any indication, there is a ceiling.

 

[GrumpyInPhilly]

^ this is what I ponder most. The price increases have been fairly regular and clearly the data supported it until now. Even a die hard resale person like me went direct when the delta was very small, especially for a small contract. With buy in over 30K now, how many people eating a Mickey ice cream bar can those booths keep drawing in during this economic environment? I wanted to add on another small CCV but you can’t buy under 50 so I will probably buy a resale now for 50 and have spent less and Disney didn’t earn anything. They are making it harder for even current members to justify even smaller contracts, which I know many use to continue to grown their membership. I still kick myself when we had the chance to buy CCV when it first opened, we even took the checkbook and I didn’t pull the trigger.

I also agree, this market may force their hand to put Poly2 in a new association. I wish we had a sense, over time the delta between direct and resale. When purchased, it was about $40 pp. Now, it Is closer to $100, without the benefits they tout. And look, if Star Cruiser is any indication, there is a ceiling.

Yes, for me (2013) it was exactly a $40 delta.

 

[Brian Noble]

The saturation of re-sale might start to impact direct.

Plenty of timeshare developers have no trouble selling full freight timeshares in the low to mid five figures with MUCH lower resale valuations. This will eat at the margins but it won’t hamper their ability to sell.

 

[Cfabar1]

3 -- I suspect we will see a growing divergence between the 2042 resorts and the long contracts. I think the pricing of the longer term contracts will stabilize, potentially start increasing again (with inflation). While I suspect pricing of 2042 contracts will continue to stagnate and decline. Each step we get closer to 2042, more buyers will second-guess those shorter contracts. They will remain appealing where the price is right, but the right price will gradually decline.

This is definitely happening, and it is NOT just 2042 resorts. The 2042 resorts are if anything exceeding reality due to their prime locations. I would argue that there is a significant difference in resale value between VGF, Poly, CCV, VGC, BLT and the others. It really is more a 2060 and beyond point where the bifurcation seems to be. Aulani and Riviera are each exceptions to this for their own obvious reasons - Non-WDW resort and resale restrictions, respectively.

4 -- The saturation of re-sale might start to impact direct. Where you can get re-sale points at $90 to $120 per point... Can Disney keep increasing direct pricing by 5-10% per year? They benefit from the fact that most buyers are ignorant of the resale market. But at some point, the price differential just becomes too great. This may further push Disney into making Poly2 a new restricted association. So that people who want to stay at Poly2 have to buy $220 direct points instead of $120 resale points.

What is Disney’s goal? Riviera resale is starting to show where reality is for that product. It is considerably less valuable on resale. It is tough to justify the price increases on the front end with the delta with resale. It is EQUALLY tough to say to prospective buyers your product will retain value when, given the Riviera experiment, it seems to appear otherwise. As soon as Disney becomes “any other timeshare” the price premium they can charge lessens… They have to be very careful….

5 -- We've seen Disney offer significant direct discounts at BLT and other sold-out resorts. This suggests the supply saturation is being felt at all levels. Therefore, Disney may not be using ROFR much for a while. Without ROFR supporting a floor, we will continue to see declining prices.

I do not expect resale to become worthless. But we are in a period of a significant correction.

Absolutely…. I think the argument for buying back all the resorts had more to do with being able to sell the hotel rooms at rack rates until they can find a Disney junkie to pay $217 (or more) for each one of those points… They are probably discovering that is not viable, or are afraid it will not be. As mentioned earlier by another poster, Disney under Chapek (and to be fair, the later years of Iger - but Chapek was running the parks for much of that time remember!) really tested the upper limits of what the customer base would be able to support. They have discovered those upper limits. I love Disney and DVC, but their product has never been a “luxury” product. It has been an elevated product sure, but not “luxury”. DVC units are very nice, but other timeshares in less desirable locations have nicer units. The price premium has been to be “at Disney” And “experience the magic”.

The Galactic Starcruiser is not working well for them at all. A Star Wars themed hotel with the equivalent of the Polynesian luau might have worked - but the product they are creating is too niche and too expensive to support long term. I suspect that building will be rebranded or the experience will undergo significant changes in a few years. DVC may be a part of that repurposement as well.

 

[Cfabar1]

Plenty of timeshare developers have no trouble selling full freight timeshares in the low to mid five figures with MUCH lower resale valuations. This will eat at the margins but it won’t hamper their ability to sell.

I don’t disagree, but I do think customers have, overall become shrewder due to Google, boards like this, etc. There’s a reason why DVC started putting those booths all over the theme parks… They need people to be so “swept up in the magic” they make a move right then and there And don’t have the chance to do their homework….

 

[Sandisw]

I don’t disagree, but I do think customers have, overall become shrewder due to Google, boards like this, etc. There’s a reason why DVC started putting those booths all over the theme parks… They need people to be so “swept up in the magic” they make a move right then and there And don’t have the chance to do their homework….

Those booths have always been there though so that is not really knew.

And, DVC guides do not promote resale value ..none of the ones I have talked yo over the years have…and the paperwork you sign makes it clear not to buy with that aspect.

 

[intamin]

What is Disney’s goal? Riviera resale is starting to show where reality is for that product. It is considerably less valuable on resale. It is tough to justify the price increases on the front end with the delta with resale. It is EQUALLY tough to say to prospective buyers your product will retain value when, given the Riviera experiment, it seems to appear otherwise. As soon as Disney becomes “any other timeshare” the price premium they can charge lessens… They have to be very careful….

IMO Disney's plan on this was to severely de-value the price of resale so that they can ROFR significantly more of them and then simply turn around and sell those ROFR'd properties direct. It hurts the value of the property while it's actively selling but because it allows those cheaper resales to go through but after it's sold out I have to imagine they'll make a lot more back because the cheaper resale values will make it that much more worthwhile for them. I don't think they care about the timeshare "retaining" value after it leaves their hands. They're going to say the value comes from being able to book these rooms for significantly cheaper than you would otherwise.

 

[Cfabar1]

IMO Disney's plan on this was to severely de-value the price of resale so that they can ROFR significantly more of them and then simply turn around and sell those ROFR'd properties direct. It hurts the value of the property while it's actively selling but because it allows those cheaper resales to go through but after it's sold out I have to imagine they'll make a lot more back because the cheaper resale values will make it that much more worthwhile for them. I don't think they care about the timeshare "retaining" value after it leaves their hands. They're going to say the value comes from being able to book these rooms for significantly cheaper than you would otherwise.

That could be. But so far they are struggling to just sell through their existing inventory. It is possible they will have five resorts actively selling soon - to say nothing of the other resorts…

Every contract they take bake they have to be confident they will sell. I’m skeptical they are able to do that - and I think that is why in part ROFR has stopped and they have started SSR and BLT incentives.

 

[mz-s]

DVC has a long way to go before the resale is anything close to "any other timeshare"

Timeshares like Bluegreen or Diamond International are basically worthless - people sell them for pennies just to get rid of the maintenance fees. Besides, none of those timeshares have one particular advantage - none of them are on Disney property.

They probably swung the pendulum too far with the Riviera restrictions, but they need to entice direct sales as much as they can because DVC members demand new resorts etc and direct sales are how that happen. Resale value is meaningless to Disney.

 

[intamin]

They probably swung the pendulum too far with the Riviera restrictions, but they need to entice direct sales as much as they can because DVC members demand new resorts etc and direct sales are how that happen. Resale value is meaningless to Disney.

Agreed. They want it to retain some value which it pretty much will just because it's on Disney property but do they care if the owner is able to sell it back and get most of their money back? Absolutely not. Resale value is something we as owners care about. If they can ROFR everything for pennies on the dollar and then sell it back they would. The only thing stopping them from doing so is they need to have a strong demand for DVC so that they don't have have to hold onto points and be responsible for paying the maintenance fees on those properties.

 

[Cfabar1]

Another issue is that resale sellers are holding onto fantastical notions of what these timeshares are worth… How many of them are truly even serious about selling their properties? That is part of the equation…

$70 pp savings, sure, resale makes a ton of sense and why buy direct?
$20 pp savings, much less clear which way is best - do i want membership extras, post 2042 resort availability, all of this becomes a much more tangible discussion….

Some sellers are living in la la land so much it isn’t even worth making an offer… That’s why there are so many current listings available for sale…