Projecting future resale values

[pianomanzano]

I think Disney (Palm Financial) does tend to get all the loan default foreclosures because they are more expensive than resale. So the resale brokers have no incentive to buy them. When I shopped the foreclosures, you could tell who financed because of how high the debt was to pay off.

I am also curious as well, but just based on the Facebook groups, I think a lot of direct buyers do finance. A lot of Riviera resellers also aren’t willing to drop their prices due to their loans, they don’t want to bring money to closing.

I have read foreclosures are pretty rare for DVC, but I think that might be because of resale values. If resale values tank, then they’ll likely become more common I think.

So if direct buyers start defaulting, Disney benefits. It’s kind of depressing, because it’s super predatory.

I agree that there's a lot of people financing, if you scroll through the county website there's tons of mortgage docs on there. My first thought is, if you're going to finance why not shop around for better rates? Disney's rates are brutal! But in general, I think it speaks to how impulsive many direct buyers are and as a consequence are either unfamiliar with resale restrictions and their implications or perhaps think that it would never apply to them. You also see people asking a lot of basic questions or talk about recalling something their guide said about using points points at values and moderates, so it's clear people aren't doing their homework prior to purchasing. So, I think there's some level of personal accountability and less Disney being predatory.

 

[DonMacGregor]

I agree that there's a lot of people financing, if you scroll through the county website there's tons of mortgage docs on there. My first thought is, if you're going to finance why not shop around for better rates? Disney's rates are brutal!

I don’t think Disney offers you the option of alternative financing when buying direct. It’s their financing or cash.

Obviously, with some forethought, a potential direct buyer could secure funding prior to purchase and in essence pay cash, but again that would require forethought and a flexible line of credit.

 

[Ruttangel]

I see there are now 1900 listings out there, in April there were 1500 (old article linked) and historically it trended around 500.
This should drive down prices but we shall see.

https://www.dvcnews.com/dvc-program...00-for-all-walt-disney-world-resorts-combined

 

[pianomanzano]

I don’t think Disney offers you the option of alternative financing when buying direct. It’s their financing or cash.

Obviously, with some forethought, a potential direct buyer could secure funding prior to purchase and in essence pay cash, but again that would require forethought and a flexible line of credit.

Right, definitely some thinking/creativity would have to be involved, but certainly other options out there like a HELOC or going through a place like Lightstream. Or even going to Monera if Disney is charging their highest option (which I think is 18.9%), although at that rate one probably shouldn't be purchasing DVC since that assumes poor credit (but there are people who still finance at that rate!).

 

[Jlo85]

They want people to buy from them and I just can’t see any benefit to them wanting to get points back via foreclosure.

I do agree that it’s mostly to get people to buy direct. But it’s more a cynical view that Disney wants to tank the resale market. Diamond said that a healthy resale market hurts their bottom line, essentially it’s better to not have any resale market.

I’ve seen a lot people say that resale value is a selling point for buying DVC, and that Disney ROFRs to protect resale value. But those things may be totally untrue, Disney may prefer to be able to buy back up their points super cheap. I wonder if guides even mention resale values during their presentation (never sat through one)?

 

[sethschroeder]

It's odd to suggest that re-sale prices can't decline -- When they have already been declining for the last year.

Not sure how long you have been around. This was predicted years ago.

Leading up to the 50th a run up in price, after a slide in price, and then continuation of steady increase after that.

It's all about the 50th spike and covid simply muddied the graphs a little bit.

Oh and keep in mind inflation has been going up faster than people are comfortable with.

match the massive increases in supply.

Massive maybe from percentage wise but it it's not like it's an actual ton in quantity.

Take all the DVC points multiply by 1% and that is what you can expect to hit the resale market in a given year.

As an example for Riviera that will be 67k points and around 350 contracts or 30 contracts per month.

Keep in mind there are like 1.9k contracts for sale across the top 10 resellers so 30 more contracts isnt much.

 

[sethschroeder]

With 18% inflation

You explained why it went "down" right there. Incredible inflation hit and this market will not respond as quickly.

8 out of the 10 underperformed VNQ.

Lets add in you consumed 0% of the VNQ value over that time while you consumed like 17% of the 2042 contracts or 8 of POLY roughly based on used points (possibly more if you have borrowed).

So you could outperform an actual investment, have used some of the value of the contract, and now sell net positive. Sounds like they came out way ahead.

In the end DVC isn't a true investment but it has held it value very well. Cash rooms, WDW attendance, direct DVC pricing, ROFR rates all feed in to the resale value.

 

[sethschroeder]

So yes, adding another 50,000 contracts is a pretty massive increase.

That is direct math though.

Resale math is 1% of that per year, 500 contracts, or 42 per month.

The 1% is based on a old OKW thread where numbers were pulled on resale contracts and then I did another check to start the year this year looking at more recent resale data across a couple different properties.

 

[sethschroeder]

real estate market from your equation

That is a bubble waiting to burst in short order anyways.

Want to talk about collapsing value? That's where you should focus.

Only thing that will keep is propped up is the new method of companies buying up housing to force people to rent instead of buy. Hopefully one or two of those companies go under or laws are put in place though to help future generations be able to buy a home.

 

[Sandisw]

I do agree that it’s mostly to get people to buy direct. But it’s more a cynical view that Disney wants to tank the resale market. Diamond said that a healthy resale market hurts their bottom line, essentially it’s better to not have any resale market.

I’ve seen a lot people say that resale value is a selling point for buying DVC, and that Disney ROFRs to protect resale value. But those things may be totally untrue, Disney may prefer to be able to buy back up their points super cheap. I wonder if guides even mention resale values during their presentation (never sat through one)?

I am one who doesn’t believe DVD does things to protect resale value. I think they make decisions that they want for sales and use RORF to snag back points because they have a reason for wanting them…and because they are a good deal.

Never had guides mention resale value and and doubt they would because the POS specifically states to not buy expecting any level of return. It’s in big and bold print so it’s not used as a selling point.

 

[Jlo85]

I am one who doesn’t believe DVD does things to protect resale value. I think they make decisions that they want for sales and use RORF to snag back points because they have a reason for wanting them…and because they are a good deal.

Never had guides mention resale value and and doubt they would because the POS specifically states to not buy expecting any level of return. It’s in big and bold print so it’s not used as a selling point.

It’s interesting because Disney hasn’t been overly antagonistic with resellers. Marriott and Wyndham definitely make reselling harder by adding additional fees and requirements.

But I think Disney is also more attractive than those other timeshares because of resale, so I dunno. Probably a guessing game. I think they probably want resale higher than the other brands, but not too much higher to make ROFR too expensive.

 

[DonMacGregor]

Right, definitely some thinking/creativity would have to be involved, but certainly other options out there like a HELOC or going through a place like Lightstream.

I’m one who used a HELOC (well actually cash out on a ReFi) to purchase my initial large direct contract. Dropped from 6.25% down to 4% interest on the mortgage and took out what amounted to 2% of the appraised value (5% of the available equity) and still lowered my mortgage payment by around $300 per month.

BTW, I was doing the ReFi anyway and didn’t do it to buy DVC, but had been thinking of DVC for a year or so and the opportunity presented itself to combine the two. Also, I had the cash before I bought and could have gone that route regardless, but decided to pull the equity instead and all subsequent contracts have been cash.

 

[CarolMN]

Right, definitely some thinking/creativity would have to be involved, but certainly other options out there like a HELOC or going through a place like Lightstream. Or even going to Monera if Disney is charging their highest option (which I think is 18.9%), although at that rate one probably shouldn't be purchasing DVC since that assumes poor credit (but there are people who still finance at that rate!).

Just FYI: Monera doesn't finance direct purchases. It's a part of the World of DVC

 

[pianomanzano]

Just FYI: Monera doesn't finance direct purchases. It's a part of the World of DVC

Oh ok, I figured they would since based on the ads we hear everywhere they refinance them. In any case, their rates aren't even that great and was used as a comparison to the highest rate you can finance through DVC (which I would never recommend financing at).

 

[Sandisw]

It’s interesting because Disney hasn’t been overly antagonistic with resellers. Marriott and Wyndham definitely make reselling harder by adding additional fees and requirements.

But I think Disney is also more attractive than those other timeshares because of resale, so I dunno. Probably a guessing game. I think they probably want resale higher than the other brands, but not too much higher to make ROFR too expensive.

I think the biggest reason DVC stays attractive is because it’s located and attached to the parks. It’s onsite and you get the benefits that cash guests get.

So, it’s directly connected to that. I would put money that many if not most buyers of DVC have no idea about resale and the value it holds.

Those on sites like this do, but others? I bet it’s not on their list of things to ask about.

POS outlines the ROfR process but I imagine if they wanted to change and add fees to resorts moving forward they could

What they have done is slowly change things up so buying resale leaves you out of stuff.

Of course, membership extras are not guaranteed and they are incidental benefits which means can’t be funded by dues in anyway based on FL timeshare law.

But, at least buying direct gives you a chance for all they offer.

The biggest change of course is resale restrictions and while it’s only RIV right now, in 10 years..assuming no change by them..it could be more and a harder choice to choose to be shut out.

The other piece DVC does have that can help is the rental market. Other timeshare don’t have that to the same degree, if at all, because they are not attached to WDW.

Even as a RIV owner who knew about the restrictions and bought, I also knew I didn’t need to worry because I could always rent points.

And if worst case happened and resale value tanks…then it’s the last contract I sell..because we see anything we’d get back from the sale as a bonus.

There will always be a resale market but as I posted, there are SSR owners right now trying to sell at a much lower level than the ROfR floor. As soon as DVD slows that down, we will see a lower floor for that resort when buyers are able to pass.

It’s why I have shared that one needs to be cautious when using the past performance to predict the future because of what DVD is capable of doing.

The pandemic caused them to scrap Reflections..probably because it also included a large cash room component which was almost certain to have the restrictions.

But there have been times within my almost 14 years that prices went down from a few years before..it’s how I ended up with BWV in the 50s and SSR in the 70s…but also ended up selling BLT in the 80s

So, one who owns longer term has a chance to at least get what they paid back..maybe even a profit..but not always.

Current trends show price for many has dropped in the past year or so for many resorts.

VGF is a good example of what can happen when DVD lowers its direct price for a resort. Those who bought long ago are still seeing the value up..but those who bought in 2021 are not and if they were forced to sell, May indeed be underwater if they financed a resale purchase.

 

[DonMacGregor]

VGF is a good example of what can happen when DVD lowers its direct price for a resort. Those who bought long ago are still seeing the value up..but those who bought in 2021 are not and if they were forced to sell, May indeed be underwater if they financed a resale purchase.

I think VGF is actually a bad example.

Anyone who bought in 2021 bought specifically because they wanted VGF over any other resort and were willing to pay the inflated direct price of a sold out resort. In order to purchase those points, the buyer had to actively seek out the resort, as the sold out resorts aren't even listed on the public-facing DVC website. They had to have knowledge that DVC will sell resorts not listed on the website, contact DVC and ask a guide about the specific availability of VGF points, and ask what the current price was. All the while seeing, like everyone else who visits the site, what current direct pricing for active resorts was (Riviera and Aulani), seeing that current resort points were significantly less, having the guide want to sell them the lower priced current resort points, and still choosing to purchase the far more expensive VGF contract.

Anyone who bought VGF in 2021 went into it with far more knowledge than the typical direct point buyer, knew they were paying an inflated premium designed to dissuade people from purchasing anything other than current resorts, and bought anyway. If they were "forced" to sell already, that's on them and no one else.

 

[havoc315]

You explained why it went "down" right there. Incredible inflation hit and this market will not respond as quickly.

18% over 4 years is not “incredible”.. it’s slightly higher than historic rates which would be 10-15% over 4 years.

And inflation would cause resale prices to go up, not come down. (If and when the inflation leads to a recession, then prices should go down).

Lets add in you consumed 0% of the VNQ value over that time while you consumed like 17% of the 2042 contracts or 8 of POLY roughly based on used points (possibly more if you have borrowed).

So you could outperform an actual investment, have used some of the value of the contract, and now sell net positive. Sounds like they came out way ahead.

In the end DVC isn't a true investment but it has held it value very well. Cash rooms, WDW attendance, direct DVC pricing, ROFR rates all feed in to the resale value.

Exactly. It’s not an investment. And it has historically held value far better than most timeshares. My expectation is that it won’t hold value quite as well in the intermediate future. (Not suggesting collapse).

 

[Jlo85]

I think VGF is actually a bad example.

Anyone who bought in 2021 bought specifically because they wanted VGF over any other resort and were willing to pay the inflated direct price of a sold out resort. In order to purchase those points, the buyer had to actively seek out the resort, as the sold out resorts aren't even listed on the public-facing DVC website. They had to have knowledge that DVC will sell resorts not listed on the website, contact DVC and ask a guide about the specific availability of VGF points, and ask what the current price was. All the while seeing, like everyone else who visits the site, what current direct pricing for active resorts was (Riviera and Aulani), seeing that current resort points were significantly less, having the guide want to sell them the lower priced current resort points, and still choosing to purchase the far more expensive VGF contract.

Anyone who bought VGF in 2021 went into it with far more knowledge than the typical direct point buyer, knew they were paying an inflated premium designed to dissuade people from purchasing anything other than current resorts, and bought anyway. If they were "forced" to sell already, that's on them and no one else.

I feel like the monorail resorts are going to sell out quickly at almost any price. Which is why the lack of ROFR at Poly surprises me. But it will also be interesting to see if restrictions really drop the resale value of those resorts. I feel like people will buy the monorail resorts, no questions asked, direct or resale.

 

[havoc315]

That is direct math though.

Resale math is 1% of that per year, 500 contracts, or 42 per month.

The 1% is based on a old OKW thread where numbers were pulled on resale contracts and then I did another check to start the year this year looking at more recent resale data across a couple different properties.

Now… follow through. If “normal” is 1% of contracts hit the resale market in a given year…
As of 2020, there were estimated 220,000 owners. So in 2020, by your estimates, 2,200 resale contracts per year.
As of now, it’s probably grown to 240,000?
So that would make it 2,400 contacts per year.

Now, you’re saying “only adding 500 more re-sale contracts per year!”

Going from 2,200 to 2,400 to 2,900 in just 5 years is indeed a big increase. A 32% increase in supply is just 5 years.
Has the US population grown 32% has WDW attendance grown by 32%

Whether the demand can keep up with these big increases in supply is indeed a very open question.

 

[Sandisw]

I think VGF is actually a bad example.

Anyone who bought in 2021 bought specifically because they wanted VGF over any other resort and were willing to pay the inflated direct price of a sold out resort. In order to purchase those points, the buyer had to actively seek out the resort, as the sold out resorts aren't even listed on the public-facing DVC website. They had to have knowledge that DVC will sell resorts not listed on the website, contact DVC and ask a guide about the specific availability of VGF points, and ask what the current price was. All the while seeing, like everyone else who visits the site, what current direct pricing for active resorts was (Riviera and Aulani), seeing that current resort points were significantly less, having the guide want to sell them the lower priced current resort points, and still choosing to purchase the far more expensive VGF contract.

Anyone who bought VGF in 2021 went into it with far more knowledge than the typical direct point buyer, knew they were paying an inflated premium designed to dissuade people from purchasing anything other than current resorts, and bought anyway. If they were "forced" to sell already, that's on them and no one else.

My point was that DVD can make a move that can cause the value of a contract to go down.

There are no absolutes and too many variables can play a role in what will happen.

Regardless of the resort, there is a always a chance if one has to sell short term you could end up taking a loss.

In that regard, it’s a good example of what can happen.

Obviously some resorts are better insulated to ups and downs long term but VGF isn’t the only one that saw a decrease in the average price using DVCRM data.