Projecting future resale values

[StoweFoSho]

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;
Right now, there are still 3 resorts with incentivized direct points: Riviera, Aulani and VGF. VGF will take at least another 1-2 years before it sells out. Aulani will never sell out. Riveria has at least another 4-5 years.
Next year, VDH joins the fray. Likely, that's 4 resorts selling incentivized points at the same, time, and Disney not using ROFR at those resorts.
In 2024, Poly tower joints -- VGF may or may not be sold out by then. So between 4 and 5 resorts for sale at direct, at once.

What's the impact of having all those resorts at direct sale at the same time?
1 -- Disney wont' be using ROFR at those 4-5 resorts. So there will be less demand-support for re-sale coming from Disney itself. You won't have that ROFR "floor"
2 -- Those points will be incentivized, giving a direct purchase ceiling...

In other words, VGF re-sale was in the 190's before it reopened for sales. In 2024, why pay $195 resale for ANY resort, when you can get direct points at 4-5 resorts for a similar price?
Meanwhile, take a look at what happened to VGF re-sale prices when direct sales re-opened... VGF re-sale dropped by 10-20% practically overnight. Well.... That will likely happen at Poly in 2024-- Current pricing of $166 at Poly, which is about the same at BLT and Copper Creek. But if Poly re-opens for direct sales... and re-sale prices drop at Poly to $145... that will also impact resale prices at BLT and CCV.

So far -- The big issues driving down likely resale prices -- DVC expansion and market saturation.

The next big issue is indeed the 2042 expiration: I believe next year, we enter a big psychological milestone for buyers: The resale contracts will clearly have under 20 years remaining. (technically, they are already under 20 years but with a 2042 expiration is psychologically still sounds like 20 years). I'm NOT saying 2042 contract prices will plummet next year. But the financial value of those contracts gets tighter and tighter by significant margins with each passing year. By the time we hit 2027-2032, most buyers likely will really scrutinize the math on a per year basis.
Of course, as demand for the 2042 contracts lessen, some of those prospective buyers will look more at 206x+ contracts. If and when VGF and Riviera sell out, their resale prices may get a little bit of a boost.

But for the reasons stated, n terms of real dollars, I expect resale prices to drop at most, if not all, resorts over the next 2 years. (Riviera and VGF *might* get a little boost when they sell out, and as 2042 contracts get closer to 2042). The raw dollar prices may increase somewhat, but not on the pace of inflation.

So let this simply be buyer beware -- I don't expect re-sale value to disintegrate into nothing. But don't go in with an expectation of significant resale. I'd go in with the expectations of a re-sale loss.

There's a lot going on here to try to explain the current market, but some of it just sounds like conjecture. I never bought in with the intention of making money on my purchase. I just bought in because I saw that I could consistently get rooms at resorts that I wanted for cheaper than the cash rate.

The DVC market goes up and down based on all kinds of factors: direct price increases and incentives, amount of resale inventory, home resort priority/room inventory, overall economy, WDW resort demand, cash room prices, ROFR activity, new resale restrictions, point borrowing, annual pass/ticket sales, resort announcements, etc. These all create trends, but trends end.

This is a luxury product that has some elasticity to it. The OP is only comparing recent purchase price points and comparing them to current-day values- Spring and Summer 2021 saw huge increases in the resale market prices and now they are coming down or are flat. This period of rapid growth is an outlier that is going to affect when you only look at the recent past. Yes, in July 2021 VGF avg resale at DVC resale market was $198pp. And that was a HUGE increase from July 2020 when it was just $156pp. Anyone whose cost basis is $198pp is going to have trouble recouping that same amount with VGF back on sale direct at that price. But every single DVC buyer has a very different cost basis that everyone else.

Everyone wants to buy low and sell high, but that's not always going to be the case. Some people will time everything perfectly and make money, others will time it at the worst and "lose" money.

However, the OP's analysis completely ignores the economic principle of utility. If I purchase at $XXpp, use my points for deluxe resort accommodations and then resell the contract ten years later at the same price point with a real dollar loss due to inflation, I still got a measurable and immeasurable utility out of the transaction. Measurable because I can compare my actual expenses to cash rooms or rented points. Immeasurable because of my satisfaction and affinity for the product.

The OP's assumptions are that everyone makes the obvious cheapest financial option when DVC buyers and owners have shown time and time again that they don't always do that. Some buy Saratoga Springs and trade-in to whatever resort they can at a cheaper cost-basis, others pay for home resort priority at smaller resorts; some purchase direct at a higher price point for ease of transaction and unrestricted points, others purchase resale for a lower-cost per point knowing that there are restrictions in place.

Are we at market saturation, or are we just at a new point in the DVC experiment where there could be more than the traditional two or three resorts that are actively selling? Are announcements of new resorts slowing the resale market as potential buyers wait for the new resorts to go to active sales? DVC News estimates that VGF expansion will run out of point inventory for direct sales in November 2023, likely before Poly tower goes on sale, but maybe there's a short overlap. That means it's likely that there are 2 WDW resorts on sale at the same time (Poly, Riv) along with one DL resort and one beach resort. I don't expect DVD to let all these go in a fire sale. They are playing the longterm game.

 

[Unclelude]

I have done the Epcot monorail from TTC having stayed at all the MK resorts.

It is in no way comparable to Skyliner from RIV to Epcot.

Totally agree.... I think skyliner > monorail

Just got back from a wonderful week ( 1 day in Epcot, enjoyed resorts rest of time)

Monorail smells like pee... Skyliner cool breeze

 

[RoseGold]

Exactly. So the only ones who are ever underwater with a DVC purchase are those who have financed and have to sell before they have paid enough of it off.

I mean, yea, that's literally what the word means, because it requires a loan.

You can still pay cash and be saddled with something you can't sell for what you paid. The oldest timeshare trick in the book. You can still get hosed without financing with other tricks, like resale restrictions.

 

[FlynnRiderSwitch]

If Disney stays in high demand or high enough demand, people will still “buy in” to Riviera resale. Maybe not as much as other resorts, but there is something intrinsically appealing about going to disney once or twice a year as a family vacation, and having the ultimate convenience of a full kitchen, etc. and being “that close” to the parks.

The idea that they will be worthless I find hard to believe. I doubt you will ever see a DVC purchase for $1 on EBay Redweek for example. There’s enough value there that the floor will be much higher.

However, I could see those 2042 resorts causing the points value to plummet in resale for them, and by in large drag the resale value of other resorts further down with them because if OKW can be had for $80 per point, (for the sake of argument), why should I buy somewhere else for “only” five or ten more years at $200 a point.

I’d imagine the shorter contract period might actually be appealing for some families (go while the kids are ages 5-15 and then 2042 rolls along and we don’t have to pay for this Disney thing anymore).

I can't see how 2042 resorts expiring are appealing for any DVC owners of those resorts (and I am one of them.) When that year approaches the resale value will plummet instead of the option to sell with 20+ years left like at other resorts. I rather have the option to resale and get my money back then not, but I accept that because we love the area of our resort.

 

[havoc315]

There's a lot going on here to try to explain the current market, but some of it just sounds like conjecture.

It's highly conjecture!

However, the OP's analysis completely ignores the economic principle of utility.

I don't ignore it. It's irrelevant to the issue I'm addressing. The utility contributes to whether DVC is a good value overall. That's not the issue I'm addressing. I'm addressing the narrow issue of resale prices over the next few years.
2017-2019, people got utility from their purchase AND re-sale prices went up.
My expectation (based heavily on conjecture) is that re-sale prices will be flat/down over the next 3-5 years.
People will still get utility from their purchase, that has nothing to do with my analysis.

It's like if I said the price of a gallon of milk is $4.29. I'm not saying whether people should buy milk or not. I'm merely stating the price. I'm merely stating my analysis that leads me to the conclusion re-sale prices will go down.

The OP's assumptions are that everyone makes the obvious cheapest financial option

I never made that assumption??! That's the opposite of what I believe, and opposite of what I've stated many times: The cost is only one element, and the differences in cost between the different resorts is usually pretty small, so buy where you want to stay, or what works for you.

Are we at market saturation, or are we just at a new point in the DVC experiment where there could be more than the traditional two or three resorts that are actively selling? Are announcements of new resorts slowing the resale market as potential buyers wait for the new resorts to go to active sales? DVC News estimates that VGF expansion will run out of point inventory for direct sales in November 2023, likely before Poly tower goes on sale,

That's not what they assume. They calculate that VGF expansion will sell out in November 2023 AT THE CURRENT PACE, but the current pace is slowing. It's certainly possible that it sells out in late 2023, but also very possible that sales stretch into 2024. (In May 2022, they estimated VGF would sell out in Summer 2023, it keeps getting pushed further back)
Which is why I said 4-5 resorts at once. RIV, AUL, VDH, POLY and maybe VGF. Between 4 and 5 resorts.

but maybe there's a short overlap. That means it's likely that there are 2 WDW resorts on sale at the same time (Poly, Riv) along with one DL resort and one beach resort. I don't expect DVD to let all these go in a fire sale. They are playing the longterm game.

Fire sale? I never suggested that.
But of 17 DVC resorts once you add VDH..
4-5 will be in open sales, where Disney doesn't exercise ROFR and offers somewhat discounted direct points..
And looking into the next 3-5 years -- 6 resorts may start to really see the effect of 2042 expiration in their resale values..

So that's 10-11 resorts with downward pressure on re-sale value, 10-11 out of 17.

No, I don't expect a fire sale. I don't expect a total collapse in resale pricing.
Nor am I discouraging people from buying DVC. I'm only saying, nothing more and nothing less -- I expect re-sale values to be flat/down over the next 3-5 years.

 

[tjkraz]

I mean, yea, that's literally what the word means, because it requires a loan.

You can still pay cash and be saddled with something you can't sell for what you paid. The oldest timeshare trick in the book. You can still get hosed without financing with other tricks, like resale restrictions.

In the short term, that is--and always has been--true of every DVC resort. If you buy VGF now for ~$200 and sell in the next couple of years, you almost certainly will take a loss. As the years pass and you factor in utility (the value of points used / vacations taken while owning), a financial "loss" at sale doesn't mean that the purchase was unwise.

If someone buys Riviera today for ~$170, uses the points for 5 years and then sells for $130, it doesn't mean the purchase was unwise. When factoring in the rental value of the points used or (heaven forbid) Disney hotel rates, it's certainly possible to realize a net gain. Holding the points longer will prove even more beneficial.

It's certainly possible that resale values are stagnating or dipping. Some adjustment on the 2042 resorts was inevitable. DVC opening VGF sales with a surprisingly cheap price likely kick started the adjustment. Anecdotally there were quite a few posters expressing interest in selling their '42 points or restricted resale points to buy VGF.

Then add the Chapek haters, people polarized by the Parental Rights in Education bill, those who found other interests during Covid, etc. There are a lot of little things which contributed to bring us where we are today.

As long as Walt Disney World remains a desirable vacation spot, DVC contracts will have value. They'll have value even if owners are limited to a single resort. Even Riviera--everyone's favorite whipping boy--would have people lining up to buy with 47+ years of ownership remaining.

 

[Jlo85]

I can't see how 2042 resorts expiring are appealing for any DVC owners of those resorts (and I am one of them.) When that year approaches the resale value will plummet instead of the option to sell with 20+ years left like at other resorts. I rather have the option to resale and get my money back then not, but I accept that because we love the area of our resort.

I'm not doom and gloom and 2042, especially Boardwalk or Beach Club. I think there will come an inflection point where they start losing resale value, probably like 2035. But they're very popular resorts. And if you take the view that Disney may shut-down those hotels to refurbish into something fancier (*cough* more expensive *cough*) in lieu of offering extensions, it might actual increase their demand going into 2042. People would want to get one last shot before it shuts-down for a couple of years.

 

[BeachClub2014]

No, I don't expect a fire sale. I don't expect a total collapse in resale pricing.
Nor am I discouraging people from buying DVC. I'm only saying, nothing more and nothing less -- I expect re-sale values to be flat/down over the next 3-5 years.

It's certainly possible that resale values are stagnating or dipping. Some adjustment on the 2042 resorts was inevitable. DVC opening VGF sales with a surprisingly cheap price likely kick started the adjustment. Anecdotally there were quite a few posters expressing interest in selling their '42 points or restricted resale points to buy VGF.

'm not doom and gloom and 2042, especially Boardwalk or Beach Club. I think there will come an inflection point where they start losing resale value, probably like 2035.

All great points, and a very interesting discussion. Maybe one factor that helps prop up the resale value of all resorts, including the 2042's is the strength of the rental market. If it remains relatively cheaper to buy points versus renting them, then I think many folks will continue to go that route.

 

[Sandisw]

I mean, yea, that's literally what the word means, because it requires a loan.

You can still pay cash and be saddled with something you can't sell for what you paid. The oldest timeshare trick in the book. You can still get hosed without financing with other tricks, like resale restrictions.

And one should not be expecting to sell a timeshare, even DVC, for more than they paid.

Sure, DVC has a great track record, but it’s still a timeshare and not meant to be a product that increases in value.

 

[Sandisw]

I'm not doom and gloom and 2042, especially Boardwalk or Beach Club. I think there will come an inflection point where they start losing resale value, probably like 2035. But they're very popular resorts. And if you take the view that Disney may shut-down those hotels to refurbish into something fancier (*cough* more expensive *cough*) in lieu of offering extensions, it might actual increase their demand going into 2042. People would want to get one last shot before it shuts-down for a couple of years.

It just seems very hard to believe you are going to have very many people willing to pay that much money for something that has a short life, especially if DVC doesn’t limit borrowing…many owners will use up 2041 points in their 2040 UY.

I think it’s much more likely that owners will just keep those contracts in the last 5 years so they get their last trips out of them.

Even now, we see people buying 2042 resorts saying they intend to hold to the end. It will be interesting the intent of buyers of those resorts in 10 years.

 

[havoc315]

It just seems very hard to believe you are going to have very many people willing to pay that much money for something that has a short life, especially if DVC doesn’t limit borrowing…many owners will use up 2041 points in their 2040 UY.

I think it’s much more likely that owners will just keep those contracts in the last 5 years so they get their last trips out of them.

Even now, we see people buying 2042 resorts saying they intend to hold to the end. It will be interesting the intent of buyers of those resorts in 10 years.

Getting to the point where anyone buying a 2042 resort really has to accept that they likely won't be able to re-sell it for meaningful value. Sure, if they sell it within the next 5 years, they likely can still get some real value, but I don't think many people buy DVC with the intent of keeping just 5 years. 10 years from now.... I'm sure re-sale will still be happening, but I suspect prices will be pretty depressed by then.

 

[BeachClub2014]

Getting to the point where anyone buying a 2042 resort really has to accept that they likely won't be able to re-sell it for meaningful value. Sure, if they sell it within the next 5 years, they likely can still get some real value, but I don't think many people buy DVC with the intent of keeping just 5 years. 10 years from now.... I'm sure re-sale will still be happening, but I suspect prices will be pretty depressed by then.

It's going to be really interesting to see what happens. If rental rates hold steady or continue to increase, then there could still be value in 2042 resorts relative to rental rates.

Depending on the price in 2035, I may be tempted to snap up a good value to complement the BCV points we already own and use the heck out of those points until they expire.

 

[Jlo85]

Even now, we see people buying 2042 resorts saying they intend to hold to the end. It will be interesting the intent of buyers of those resorts in 10 years.

I do think most people will hold and pool points, but that will also increase demand with fewer contracts on the market.

I think the flip side of ‘Buy where you want to stay’ is that a lot of people don’t really consider (or even want to consider) the financials of DVC. Even today, it’s really hard to say that Grand Californian or Beach Club will save buyers any money long-term at current prices. But people want to stay at those places…

 

[Sandisw]

I do think most people will hold and pool points, but that will also increase demand with fewer contracts on the market.

I think the flip side of ‘Buy where you want to stay’ is that a lot of people don’t really consider (or even want to consider) the financials of DVC. Even today, it’s really hard to say that Grand Californian or Beach Club will save buyers any money long-term at current prices. But people want to stay at those places…

Sure, but at least now, with the 2042, you do get 19 years of vacation out of it, even if it’s not a perfect financial choice…especially since you have to assume what the cash rate will rise,

When you get close to the end, say 2040,,,you will know what your cash rates will be so the numbers will be much more accurate.

Another big unknown is what DVD will do those last few years with the points they own in terms of discounts on cash stays. They may decide to offer the rooms at a significant discount to squeeze every last cent they can get which could upset the apple cart for even renting at those resorts too.

Just like with RIV, I think we may have a better idea of things in a few years on what the future could hold for value on these expiring resorts.

 

[Jlo85]

Sure, but at least now, with the 2042, you do get 19 years of vacation out of it, even if it’s not a perfect financial choice…especially since you have to assume what the cash rate will rise,

When you get close to the end, say 2040,,,you will know what your cash rates will be so the numbers will be much more accurate.

Another big unknown is what DVD will do those last few years with the points they own in terms of discounts on cash stays. They may decide to offer the rooms at a significant discount to squeeze every last cent they can get which could upset the apple cart for even renting at those resorts too.

Just like with RIV, I think we may have a better idea of things in a few years on what the future could hold for value on these expiring resorts.

At least in my short experience, Disney is really stingy and specific with their cash DVC stays. I’ve been trying a lot of different dates and rooms to compare rack rates, and only like one room type is available at each resort (probably intentionally).

So, if the choice is depending on Disney availability or DVC, I get why people will pay a premium for DVC if you’re more likely to get the room you want at the resort you want.

 

[E2ME2]

While I don’t do studios much any more, when we bought the goal was to be on property still and staying at other places, even the Swan was not the same.

It goes back to spending your money on what will make you happy and some things aren’t the equivalent.

We almost financed when we bought but ended up not needing to but we went in with a different mindset. We had a yearly budget for our stays at WDW for the room..we were at CR 85% of the trips we’d been taking almost yearly for 15 years before buying.

At the time, even with financing, we could buy BLT and not go over that budget and in 10 years when the loan was paid, our expenses would go down.

We knew we’d visit long after that so it made sense to spend our money this way.

I think it just all depends on what works for you and for many, studios do.

YUUP - Used our first 210 Points for 1BRs and 1 to 2 trips per year, while still working.
Now, we use our 665 Points for Studios for 6-8 weeks per year, in retirement.

& BCV still appeals to us, even with a 2042 expiration, as we will be in our 80s at that point, and if we outlive the resort, and don't benefit from resale - not having the MFs will be fine by us!

 

[hglenn]

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.

Could DVC remove the right/ability to rent points out? contractually?

 

[CarolMN]

Could DVC remove the right/ability to rent points out? contractually?

No. Our contracts expressly allow it - they just include a caveat that we will be competing with Disney to do so and as a result may not be able to find customers. I've paraphrased the caveat, but you can find the exact wording in the documents you sign at purchase.

 

[Sandisw]

Could DVC remove the right/ability to rent points out? contractually?

The POS specifically allows that owners may rent their points as long as they do not do it for commercial purposes.

DVC does control the definition of commercial purposes so if they want to make that stricter, they can…but renting can’t be stopped completely…whether they could in new resorts? I don’t know but it wouldn’t make a lot of sense because if the product could only be used when an owner goes, it’d be a pretty drastic change.

Of course, I have never used resale value as part of my equation other than to figure out at what point could I give it away and feel I have gotten my value for stays out of it.

Maybe that is why I am indifferent to resale restrictions because they won’t impact me as an owner, especially since we book all trips at 11 months, even ones were are not sure will happen.

 

[Sandisw]

At least in my short experience, Disney is really stingy and specific with their cash DVC stays. I’ve been trying a lot of different dates and rooms to compare rack rates, and only like one room type is available at each resort (probably intentionally).

So, if the choice is depending on Disney availability or DVC, I get why people will pay a premium for DVC if you’re more likely to get the room you want at the resort you want.

I agree that is how it is now and we don’t know exactly how DVD/DVC uses points that they own. We know they use them to sell OTU points…we know they hold some for direct sales of sold out resorts…but beyond that, no idea how many rooms they secure at 11 months out using their own points.

And, what we see offered for cash could be inventory from members who traded out, or rooms moved there because they can be rented to create breakage.

But, we have never been yet in a situation where DVD will own points for rooms that will be gone in a year…so, it’s possible they could decide to simply use all those points, reserve as many rooms as they can at 11 months, and for that year, offer special deals to stay at the 2042 resorts, just to grab extra cash. Heck, they Could even offer them to DVC direct owners at a the discounted cash price.

They could offer owners a chance to give back contracts those last few years at a really low level just so they can get out from MFs, and that could depress the value.

I think that is why no matter what any of us think, it’s all random guesses because 19 years is still 19 years away.