Real estate bubble? Will resale prices drop?

[Cruelladeville]

What does Viagra have to do with the GDP?

This is the same conversation that has taken place since 1991(without the part about viagra) , and guess what? The prices were $48 a pt, and they continued to rise to where they are today, at about $85 at resale. I decided to buy in because my stock had lost 1/3 of its value, and if I was going to lose it anyway, I might as well lose it on vacations. So I bought, and the prices continued to climb, and I am still taking wonderful vacations. If the prices fall, I will rethink owning DVC, but so far it hasn't happened.

 

[JimMIA]

What does Viagra have to do with the GDP?

I was just making a silly commentary on the way the news seems to have more to do with getting watchers for commercials than the actual content of the news itself.

 

[JudicialTyranny]

I know this won't be a popular topic here, but my dh is concerned about buying now because of the current situation with real estate.

Not to be nitpicky, but I do some work in the real estate industry, and most real estate people do not consider timeshares as "real estate".

 

[Cruelladeville]

Whew! I thought you were making a direct correlation, and, in that case, I would suggest that the midwest needs several cases of viagra to "get things moving" out here.

 

[Blue&Gold]

The official definition of recession reminds me of the saying "Lies, Damned Lies, and Statistics".

Agree to a degree, but would offer that while implicitly trusting statistics---particularly government statistics---is bad, it may be just as bad to think that a local anecdote equates to a global phenomenon. In May, there were 6 houses on my block for sale and people in my neighborhood were acting like THE END IS NEAR, yet today there is only 1 left unsold. Which snapshot in time should I use to characterize the local economy?

The OP made a statement that "Where we live, people are having a hard time selling real estate. Houses are sitting, people are being forced to cut prices, no one is showing up at open houses, etc. My next door neighbor has had his house on the market for 3 months and 5 people have been by to see it."

Well, maybe those folks had gotten greedy and over-priced their homes... Maybe they thought there was some guarantee of 10% annual appreciation...Maybe local property taxes have shot up? The fact that your neighbors' house won't sell doesn't mean the nation's economy is in the crapper.

I see this all the time here... Posts like "my room was dirty so therefore all Mousekeeping sucks." Resist the urge to extrapolate single events to all or nothing conclusions.

Yes, DVC is a leisure expense and sales will undoubtedly show signs of slowing when the economy slows again. However, the value of a DVC point has outstripped inflation since 1992. An OKW point bought in '92 for $48 adjusted for inflation ( http://minneapolisfed.org/Research/data/us/calc/ ) would/should cost today $69.28---yet OKW resale prices are hovering in the mid-70s.

I don't think DVC membership is a money-making enterprise, or a replacement for a wise broad-based investment strategy, but I only wish I'd bought in sooner...

 

[deedeetoo]

Boy, you ask a simple question and give an example from your personal experience, and look what happens....

I didn't make up the fact that stock market has been marching steadily downward lately. I also didn't personally create the term housing bubble. House sales in Massachusetts are slowing as I described. I've read about problems in other parts of the country too. Maybe things aren't as bad everywhere as they are here, but that is one reason that I posted the question.

I'm sure the government issued a report that said the economy is growing like gangbusters, but take a peak at the CNN business page (or any other business website for that matter) and it doesn't like so good.

I won't buy your argument that the economy is going great. But I will consider your opinion that DVC prices will continue to rise.

 

[Blue&Gold]

These are called the DIS Discussion Forums... My comments are not a personal attack. Your initial post was based on an assumption that there is a recession coming... OK. In economic terms there is always a recession coming, it's just a matter of when. A bad business climate (for some) and slowing home prices don't necessarily equate to a recession. One of the reasons the stock market is down (and mortgage rates up) is that inflation is starting to show its ugly face---primarily because the economy has or is growing too fast.

I don't think the economy is doing "great." I think the GDP grew at 5.3% in the first quarter. Just thought I'd share a hard fact, same way I would if you had posted "I won't buy at SSR because the lake between it and DTD is a sewer treatment plant." It isn't.

All said, I'm glad you consider at least part of my post worth considering.

 

[Judique]

My two cents:

I haven't noticed DVC resale prices falling over the three years that I've been a member. Quite the opposite, in fact.

Which is one reason why I have joined the chorus of otherwise-happy DVCers who wail: "I only wish I'd bought in sooner!"

When I think of all the money I coughed up for YEARS at the deluxe resorts...

I pathetic.

I used to wish I'd bought in sooner for the first couple of years. Now, I'm just happy I bought when I did instead of waiting any longer.

 

[JimMIA]

One - the stock market is a leading economic indicator -- in other words, it tries to predict future economic situations. It also happens to be a notoriously poor predictor of the future.

Two - The stock market tells us little about the recent past or current economic situation.

I didn't make up the fact that stock market has been marching steadily downward lately.

And three -- I'm sure you didn't make that up, but somebody did. The two stock market indexes commonly cited as "the stock market" are the Dow Jones Industrials and the Standard & Poors 500.

DJI - One year ago, the DJI was about 10, 200 (looking at a small chart; can't give you a better estimate). Five years ago, the DJI was about 10,500. It closed this afternoon down 60+ points at 11,019, or UP about 5% in the last year.

SPX - One year ago, the S&P 500 was about 1,200 and it was at about the same level five years ago. Today it closed down $6.60 to 1,245, which is UP about 4% over the last year.

Both indicies have trended steadily up from October to May, and down since May, which is the normal pattern of the market in good markets and bad.

 

[deedeetoo]

OK, I concede. You guys are obviously much smarter than I am. I wish I was as smart as you.

I think I will leave this board for awhile and look for a friendlier place to hang out.

 

[fkj2]

OK, I concede. You guys are obviously much smarter than I am. I wish I was as smart as you.

I think I will leave this board for awhile and look for a friendlier place to hang out.

Don't leave. I think discourse and the exchange of varied ideas is thought-provoking. And don't think your opinion is discounted. I live in Ohio, where we have quite a few Delphi and GM employees. I shouldn't have to elaborate on the possible future we face. Having said that, I am continually amazed at how the population here continues to spend. My concern is that if/when housing crumps, people run to their stock brokers to sell off their portfolios to keep the roof over their heads. Add in the possibility that foreign markets dump dollars, that's an entirely different ballgame as we all know that dollar declines are inflationary; it'll cost more dollars to buy goods and services--many of which are now made overseas. A slowing housing market is one concern that may affect all of us and hold larger ramifications for the overall economy.

 

[anniet]

deedeetoo-

I live in MA and own DVC, and want to give you my story- you might find something helpful...

I bought DVC in 2002 when I realized the money I was putting away to purchase a home in MA would get me NOWHERE. I have come to the conclusion I DON'T WANT to own a house here- personally I don't think the homes here are worth the asking prices even WITH the recent drops, but people here make a lot of money so everything is more expensive here.

So I bought DVC (which is the best money I ever spent by the way) got married and in 2004 bought a brand new 2000 square foot home in Florida for less than half of what I would have paid for a 1500 square foot home in MA. Unfortunately, I could not make the money I was making in MA, and contrary to what people will tell you while the home itself was cheaper than it would have been in MA, my experience was that the cost of living there wasn't as low as the pay cut I took.

So now we own a home in Florida that we are renting out, we rent a condo in MA and my husand and I are working here until something gives in the future and allows us to move back to our Florida home. (It could happen with the company I am working with, but may take a few years so keep your fingers crossed for me)

All that being said, DVC is definitely worth the money and as others have said Disney's ROFR will keep the costs from falling AND you also have to consider that the longer you wait the less years will be on the lease. If you love Disney (and I think you do) forget about whether or not the price is going to fall. You are not buying with the intention of selling it are you? Its not an "investment", in anything except an opportunity to share many wonderful vacations with your family. And in that respect it will pay you back more than you can possibly hope it will!

 

[*elaine*]

Don't leave, it was an interesting question. And, in my neighborhood, where things were sold within 3 days (tops) of being put on the market 3 years ago to now (I was fortunate that I was able to see and make an offer - above asking price - on the day our townhouse was put on the market), where we have at least a dozen houses in the neighborhood that have been on the market for 8 or more months now, real estate *is* crashing in some areas. And I'm just outside of DC, where the job market is stable.

All that being said, I don't think that DVC and other timeshares will be affected by dropping real estate prices in some parts of the country. If the economy, as a whole, tanks, that might be a different story.

But, I will echo the others who have said that you should look at DVC as to whether YOU will get your money out of it taking vacations, not as to whether the overall price of points will continue to rise. Because, hopefully you love the idea of WDW vacations at DVC resorts that you plan to keep and use your membership/contract points until the contract ends.

 

[Blue&Gold]

OK, I concede. You guys are obviously much smarter than I am. I wish I was as smart as you.

I think I will leave this board for awhile and look for a friendlier place to hang out.

Pardon me if I skip the sensitivity moment here... But your original post started with "I know this won't be a popular topic here" and then you are surprised when someone disagrees with your premise?

Frankly, I think your post quoted above is far more sneering and cynical than anything else written on this thread. No one here wrote anything personally dismissive or derogatory towards you.

 

[Sarnia]

Pardon me if I skip the sensitivity moment here... But your original post started with "I know this won't be a popular topic here" and then you are surprised when someone disagrees with your premise?

Frankly, I think your post quoted above is far more sneering and cynical than anything else written on this thread. No one here wrote anything personally dismissive or derogatory towards you.

I'm sure you didn't mean it that way, but your original reply to the OP was rather condesending.

It is very possible for house prices to fall even though GDP is doing well if there is a house price bubble. High GDP would be a major factor in causing a house price bubble, it's not likely to happen when the economy is doing poorly. No less than Alan Greenspan has voiced his opinion that house prices are too high in the US. Of course a correction does not always involve a large drop in prices, they may just remain stable for a long period of time.

The OP had a very valid question, and is right to raise any concerns before spending a not inconsiderable amount of money on DVC.

To the OP, personally I don't think that a correction in the housing market will have any impact on DVC prices. I think that would need a fairly large recession across the US economy, which doesn't look likely in the near future. At the moment the Federal Reserve look likely to have to raise interest rates another couple of times to keep inflation at bay.

 

[Blue&Gold]

I'm sure you didn't mean it that way, but your original reply to the OP was rather condesending.

Thanks, Mom. I'll try to play nicer with the kids in the sandbox next time. I'd hate to be seen as condescending.

 

[Sarnia]

Thanks, Mom. I'll try to play nicer with the kids in the sandbox next time. I'd hate to be seen as condescending.

I can tell you would hate that. Thanks for correcting my spelling mistake too

 

[deedeetoo]

Well I guess I couldn't make myself stay away for long. I am feeling much better this morning. Thank you everyone for your kind words.

Blue&Gold: I am sorry for my post. You are right. It was mean spirited. I was feeling attacked and hurt and should have waited to calm down before I posted a reply. I expected to be attacked for suggesting that resale prices would fall. I did not expect to be challenged for my assumptions about the economy. I hate debating. My husband loves it. I should have let him argue with you. He would have had fun quoting statistics back and forth. I guess it a guy thing.

 

[Blue&Gold]

No offense given, no offense taken... So no offense!

DD2---Bottom line, whatever your view of the economy, it would appear from most posters here that few hold with the idea that a downturned economy would drop the bottom out of the resale market. Obviously, there will be a connection between personal finances and the numbers of people needing/wanting to sell. But, given Disney's record and requirement to maintain a ROFR "floor," prices shouldn't take too big a hit. The problem will likely be getting a buyer to bid for your contract, because essentially ROFR sets the price.

 

[Anewman]

Lets just pretend that Resale prices drop $5 per point over the next 2-3 years.

Are you going to pay retail for your vacations over the next 2-3 years?


And that does not mean that resale value can not go back up the following 2-3 years after that. Just seems like a big "IF" to me, since even if prices did drop it would still save you money on WDW vacations.