Projecting future resale values

[RivShore]

I agree that they play a big role in what we may or may not see with prices

So near park resorts will conman’s what they command without as much impact on price but places like SSR, etc. will

Even the 2042 resorts have seem form ROFR these past few years that didn’t seem to be there years ago which may have played some role. I mean DVD was letting sub $120 pass in 2020.

It just goes to show that DVD and decisions can impact things for particular resorts differently!!!

Good points. And it shows that there are so many variables and so many non-free market forces at work, that trying to determine any future pricing with any accuracy is impossible.

 

[Jlo85]

I would also narrow it down to just enjoyment of the parks. If you have faith that you and your kids will get the full ~50 year use out of the product, nothing else matters.
And, one thing that is certain, you will be happy when you compare what a cash night costs in 2070 vs. what you (or your parents) paid for that night in 2020, even with inflating fees.

Agree, though I think it is important to think about Disney long-term. Because you are giving Disney control. Like ‘Jesus take the wheel,’ but it’s Disney instead.

 

[havoc315]

Not really comparing buying stocks to DVC, more just comparing it to the market performance. Hard to say DVC is underperforming this year when the whole market is underperforming this year.

The market is underperforming the market?
Umm......

 

[Jlo85]

The market is underperforming the market?
Umm......

Basically saying IMO the macroeconomic headwinds are having (and will have) more of an impact on DVC values than the microeconomic issues you’ve cited.

Disney and real estate stocks go up = DVC values go up. Literally people who traded in their Disney stock to buy DVC for this reason.

 

[havoc315]

Basically saying IMO the macroeconomic headwinds are having (and will have) more of an impact on DVC values than the microeconomic issues you’ve cited.

Disney and real estate stocks go up = DVC values go up. Literally people who traded in their Disney stock to buy DVC for this reason.

Ok… but that’s not true. Disney and real estate have gone up. DVC has gone down. So they haven’t been tracking.

Yes… if the cost of EVERYTHING goes up, you’d expect the price of DVC to increase as well… that’s how inflation works. And that’s been somewhat true for much of DVC history. But in the last few years, more divergence… DVC falling below inflation.

 

[Jlo85]

Ok… but that’s not true. Disney and real estate have gone up. DVC has gone down. So they haven’t been tracking.

Where are you seeing that? Disney stock is down 30% YTD. And it’s only up 10% over the past 5 years. Resale is doing better than that.

 

[Cfabar1]

Aulani seems beautiful, and the price seems good. The problem is, the fear of never getting to use your points at the Disney WDW campus, and it is too far to commit to going back every year.

 

[havoc315]

Where are you seeing that? Disney stock is down 30% YTD. And it’s only up 10% over the past 5 years. Resale is doing better than that.

I already showed you how you were wrong about the real estate index fund because you didn’t include dividend yield. So now you’ve dropped the real estate market from your equation?
Now claiming somehow that DVC resale is directly correlates to Dis stock price?
You keep changing arguments, so let me pin it down first. You’re claiming, DVC resale value will track Dis stock reliably?

If that’s your argument, I’ll address it.

 

[NVDISFamily]

The resale market has seen some downturn but it's not as far down as I would like in some areas due to the artificial floor created by ROFR.

The main wildcard that you have to gamble against is government policy and inflation. I think there is no core long term goals by the policy heads other than keep people happy as long as possible. The fed is hiking up the rates now, but if/when unemployment starts to tick up fast, would not be shocked if they drop rates back to almost nothing and crank that money printer dial to 11 Spinal Tap style.

I'm lucky to be in a high demand/growth profession, but I'll tell you what I'm seeing money/inflation wise is silly. People on my teams are openly telling leadership that we expect at a minimum another 10% inflation adjustment this year on top of our bonuses and annual increases..... Salaries that used to be for experienced professionals with a few years experience are now almost baseline for college grads. It's all a bit silly. That's the gamble I took to buy DVC over the past few months. I don't hope, but I could see 8% inflation being the new normal.

And unless we just give up and start burning stacks of 100s in barrels to stay warm at night, when ground beef hits 50 bucks a pound, and night at the Best Western hits 600 a night, DVC points will go up in the long run......

 

[BeachClub2014]

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.

I guess my real question is: at what point do you reach Direct Point saturation?

I would like to circle back to these points, as they are interesting and sorta got lost in the shuffle.

At what point does the market become saturated with available points, both resale and direct? If the current business model of DVC is to make the lion's share of profits from direct sales of new contracts, how many of those points can be reasonably sold in the next 19 years, and at what resorts?

 

[Sandisw]

I would like to circle back to these points, as they are interesting and sorta got lost in the shuffle.

At what point does the market become saturated with available points, both resale and direct? If the current business model of DVC is to make the lion's share of profits from direct sales of new contracts, how many of those points can be reasonably sold in the next 19 years, and at what resorts?

It is an interesting idea to think about but I think resort can play a role for resale saturation.

It may not always be equal. I was looking at the ROfR data and viewing it from the sellers side.

There are a lot of SSR contracts taken recently that were sub $120. So, while the buyers lost, it does show a lot more sellers we’re willing to sell at a lower price Sinc e they get paid regardless.

And, just our board sponsor has 65 contracts for this resort alone.

So, I’d say that we are pretty saturated right now because ROFR may be preventing more buyers from even trying for contracts because they don’t want to pay what it’s now taking, even though we seem to have plenty of sellers willing to sell lower.

 

[BeachClub2014]

It is an interesting idea to think about but I think resort can play a role for resale saturation.

It may not always be equal. I was looking at the ROfR data and viewing it from the sellers side.

There are a lot of SSR contracts taken recently that were sub $120. So, while the buyers lost, it does show a lot more sellers we’re willing to sell at a lower price Sinc e they get paid regardless.

And, just our board sponsor has 65 contracts for this resort alone.

So, I’d say that we are pretty saturated right now because ROFR may be preventing more buyers from even trying for contracts because they don’t want to pay what it’s now taking, even though we seem to have plenty of sellers willing to sell lower.

I tend to agree that the specific resort matters. Here's a snapshot of current resale listings of WDW resorts taken from a DVC sales search engine:

• RVA - 53
• BRV - 67
• VGF - 81
• CCV - 99
• BLT - 105
• PVB - 106
• BCV - 115
• AKV - 136
• BWV - 159
• OKW - 216 (2042 - 199 and 2057 - 19)
• SSR - 424

I don't have the data to see how the relative number of resale contracts compares to the number of overall contracts in each of the resorts, but assume that would also be a factor.

 

[Cfabar1]

The inflation adjusted sale price will have to go down. So many unknowns like:

1. Will disney actually maintain the property in excellent shape for all 19 remaining years on my contract (2042 resorts)? Or will they slowly let it go downhill, defer maintenance until they determine what they want to do with it (remodel, sell new contracts, conversion, sell to a developer, etc.)

2. The Riviera/future resort restriction situation,

3. Those looking at the current corporate situation at Disney - who are skeptical that current management has what it takes to continue to make the magic happen (not dissimilar to the share prices falling).

4. Aging demographics in the US, which will limit the appeal of the DVC which skews towards families in terms of room design, locations, etc.

5. Will Disney increase supply of points when the 2042 points disappear? Or will they not? Recent experience converting hotels into DVC properties, seems to suggest they will. If that is true, a flood of points for sale would hit the market, which I doubt they would want to do. More likely, a balancing act would take place - making many rentals, while others become spiffed out. Other properties maybe demolished entirely or repurposed for other needs. All leads to more and more and more unknowns…. which make buying points even riskier…

Timeshares (of any kind) are fun, but to me, they are not an “investment”.

 

[Jlo85]

One of the cynical views of the resale restrictions is that Disney is intentionally trying to keep direct buyers underwater on their loans. At least, Diamond Timeshares has said that is their plan - it's cheaper for them to repossess properties via foreclosure than via ROFR. So, if you think Disney is thinking along the same lines, then you can kind of gauge where Disney wants resale prices to be.

 

[havoc315]

I would like to circle back to these points, as they are interesting and sorta got lost in the shuffle.

At what point does the market become saturated with available points, both resale and direct? If the current business model of DVC is to make the lion's share of profits from direct sales of new contracts, how many of those points can be reasonably sold in the next 19 years, and at what resorts?

I don’t know the answer.
As they can tightly control direct points, I don’t think they will ever hit a point of saturation where it’s an unsellable product. There will always be new families to sell too. Saturation of the resale market will also bring down direct prices but only to a degree — the re-sale product is “inferior” and many buyers don’t even know the resale market exists.
If there isn’t much demand for direct points, they just stop building new DVC. Part of Riviera or Poly tower could permanently be used for cash rooms.

But while Disney can tightly control direct point supply, no centralized force can control the re-sale supply. It constantly grows. It only shrinks when resorts expire. It can shrink a bit with ROFR buybacks, but those are typically turned around as new contracts, right back into the pool.

So I do believe resale hits saturation, I don’t know when. And don’t know how severe it will be.

One possibility — we could effectively see a divergence in the resale market over the next few years. The saturation point might be now, explaining recent decline in prices.
But then we can start to see a split in the near future:
As I said, the supply of resale points only gets reduced when contracts expire. But.. as we get closer to the expiration date, the demand for those contracts will drop. So the supply of “desirable” contracts may actually get smaller as those 2042 contracts become less and less desirable.
Not saying this will happen — but it’s entirely plausible that we hit a point where 2042 contracts start to drop quickly, while demand for 2060+ contracts jumps up.
That young family in 2015 who didn’t really care whether a contract was 27 years (kids will have their own kids when our contract expires) or 47 years (may be dead by the time contract expires)… a similar family may really care in 2025 when it’s a choice of 17 years (our contract will expire before our baby even graduates high school) and 37 years (will take the grandkids some day).

 

[RoseGold]

I've thought more about your confusing argument, and I think it's that DVC is already saturated? That one makes a lot more sense to me.

There's still an awful lot of Aulani and RIV to be sold.

Direct is really expensive, and who actually wants this for 50 years anyway?

 

[havoc315]

I've thought more about your confusing argument, and I think it's that DVC is already saturated? That one makes a lot more sense to me.

There's still an awful lot of Aulani and RIV to be sold.

Direct is really expensive, and who actually wants this for 50 years anyway?

It's definitely possible we are already pretty saturated. Over 400 SSR contracts on the market certainly *looks* like a lot. (But I have no idea what the historical normal is, so I can't make a judgment here).

There is a big reason to buy a long 50 year contract -- Beyond the ability to pass it on to your children, there is knowing that after you're done, there will still be SOME re-sale value remaining.
But yes, as you said -- "who actually wants to own it that long" -- It's fair to say that most long contracts will either be: 1 -- passed on to the next generation 2-- re-sold or 3-- abandoned.

I wonder what proportion of original 1992 owners still own and use their original contract. (I'd guess it is fewer than half).

If we are in saturation right now, then I do expect to see prices continue to drop for a while. But we may ultimately see a divergence, as demand shifts to the longer contracts. So the overall "averages" may continue to drop, but longer contracts start to increase in price as the shorter contracts start to more rapidly lose value.

 

[npatellye]

One of the cynical views of the resale restrictions is that Disney is intentionally trying to keep direct buyers underwater on their loans.

That only applies if a majority of direct buyers have loans. I understand that people take out loans to buy their direct contracts but I would be very curious to see:
-percentage of direct buyers who take out loans
-percentage of direct buyers who take out loans from Disney
-percentage of direct buyers who default on their loans
-percentage of direct buyers who default on their loans from Disney

I’m not sure what those numbers would look like but I think it would interesting to see. I don’t think Disney gets all of the foreclosures but I would be curious to see the numbers foreclosures they get, too.

 

[Jlo85]

That only applies if a majority of direct buyers have loans. I understand that people take out loans to buy their direct contracts but I would be very curious to see:
-percentage of direct buyers who take out loans
-percentage of direct buyers who take out loans from Disney
-percentage of direct buyers who default on their loans
-percentage of direct buyers who default on their loans from Disney

I’m not sure what those numbers would look like but I think it would interesting to see. I don’t think Disney gets all of the foreclosures but I would be curious to see the numbers foreclosures they get, too.

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.

 

[Sandisw]

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 have not seen anything to suggest that a higher number of direct buyers at RIV are financing more than any other resorts in years past.

I honestly do not believe restrictions have anything to do with trying to force foreclosures.

They started in 2012 trying to make resale different than direct..restrictions are just the latest move with that goal in mind.

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