Resale Market Outlook

[Dtw002]

Hello -

I presume this is like timing the stock market, but also value that some of you have been watching resale pricing for many years and have seen the ups and downs.

Any opinion on pricing right now, especially on resorts with a 2042 expiration (bcv, bwv)? Do you think we are at the peak of price? Or with Disney continuing to increase their prices that keeps the secondary market competitive?

About to close on our first resale and have a nagging feeling that we could be buying at the peak.

Thanks

 

[Brian Noble]

There's only one way to know if we are at a peak or not: this site is a great predictor.

In other words, don't worry about it. Ask yourself if you are getting fair value for the price. If you are, buy it.

 

[Dtw002]

Ha! It said 'ask again later' - IS THERE A DEEPER MEANING?!?

I know, I like to drive myself nuts. Not just is it a good deal - but is it the best deal. Buying a timeshare is a rather irrational decision .... I probably need to stop trying to financially rationalize it. I know it will be a great investment for my family - which is worth more than $.

 

[Brian Noble]

Here's the thing. You don't need the very best deal. You need a good deal. Don't sweat over the last few dollars.

 

[_auroraborealis_]

The challenge with certain of the 2042 resorts (cough BWV and BCV) is that if you want home resort for Fall Frenzy, the demand level is there to sustain prices. So the pure financial value is likely to actually go down over the next few years, barring major changes to the economy as a whole. I don't see PPP going down for those resorts.

 

[BillPA]

IMHO if DVD keeps raising prices on the few resorts they have to sell, Aulani, Poly and CCV, the existing resorts will maintain there value, maybe even increase slightly, at least for the next 5-10 years. As the remaining years drop below 20 the prices will no doubt drop. Just MHO

 

[Dean]

Hello -

I presume this is like timing the stock market, but also value that some of you have been watching resale pricing for many years and have seen the ups and downs.

Any opinion on pricing right now, especially on resorts with a 2042 expiration (bcv, bwv)? Do you think we are at the peak of price? Or with Disney continuing to increase their prices that keeps the secondary market competitive?

About to close on our first resale and have a nagging feeling that we could be buying at the peak.

Thanks

It it truly makes sense otherwise (only use at DVC resorts) and you're not taking unnecessary risk in buying (job stable, no consumer debt) and you've educated yourself sufficiently on the system; then waiting has cost also. If you're uncertain for other reasons, waiting doesn't have that much cost but it will add to the long term cost modestly but incrementally.

 

[BK2014]

I am certainly no expert in these matters, but here are my two cents and what I considered in just now purchasing a 100pt resale at BWV: I think as the 2042 mark comes closer, demand for contract resales will likely drop. But assuming DVC keeps those resorts in good condition, I think the demand for rented points will stay the same or maybe increase significantly. [Edited to remove inaccurate statement.] Certainly, if you rent your points directly, I think you would be able to charge a premium for resorts like BWV as it gets closer to 2042. People love that resort, but I think the earlier contract end date will keep a lot from buying contracts unless they are discounted significantly. And then there is the whole ROFR issue. Just my opinion though.

 

[_auroraborealis_]

I believe most brokers who rent points pay the same amount per point to the lessor regardless of the home resort

This is not accurate. The brokers pay less in home resort booking for AKV, SSR, OKW, HHI and VB. Once you're within 7 months, pricing is the same.

 

[BK2014]

This is not accurate. The brokers pay less in home resort booking for AKV, SSR, OKW, HHI and VB. Once you're within 7 months, pricing is the same.

Thank you for pointing out my incorrect assumption. I will edit my post.

 

[DougEMG]

One way to look at it is that if you don't buy and rent points instead what would the price have to drop by to make holding off buying worth while.

As an example, for BWV/BCV the cheapest you can rent for is about $14. If you owned you would be paying about $6 in MF. So renting will cost $8 per point more per year. So if prices drop by $10 after one year, you ended up over paying by $2/point if you bought instead of renting and waiting. Looking at a 3 year period, prices would have to drop by more than $24/point to make renting and waiting to buy worth while.

Prices are only going to come down when the economy tanks, people start losing their jobs and can't afford to keep their DVC. How far off is that from happening? I have no idea.

 

[BK2014]

One way to look at it is that if you don't buy and rent points instead what would the price have to drop by to make holding off buying worth while.

As an example, for BWV/BCV the cheapest you can rent for is about $14. If you owned you would be paying about $6 in MF. So renting will cost $8 per point more per year. So if prices drop by $10 after one year, you ended up over paying by $2/point if you bought instead of renting and waiting. Looking at a 3 year period, prices would have to drop by more than $24/point to make renting and waiting to buy worth while.

Prices are only going to come down when the economy tanks, people start losing their jobs and can't afford to keep their DVC. How far off is that from happening? I have no idea.

Your example doesn't seem to account for the initial investment cost per point. Maintenance fees are one thing, but in order to own the points, you had to buy the contract in the first place. Also, if the economy tanks, and prices come down, isn't likely that the amount you can charge per point for renting will drop as well?

 

[supersnoop]

Your example doesn't seem to account for the initial investment cost per point. Maintenance fees are one thing, but in order to own the points, you had to buy the contract in the first place. Also, if the economy tanks, and prices come down, isn't likely that the amount you can charge per point for renting will drop as well?

The initial investment is precisely the variable we're trying to solve for. Is it better to pay now, or will prices be lower in the future? And how much lower do they have to go in order to make waiting a good idea?

 

[BK2014]

The initial investment is precisely the variable we're trying to solve for. Is it better to pay now, or will prices be lower in the future? And how much lower do they have to go in order to make waiting a good idea?

It seems that there are too many variables to account for. But with a definite contract end date, the longer one waits to make the initial investment, the lower the price per point has to drop to make the purchase worthwhile. But then you still have to take into account the annual dues, which will probably always increase. Also, any determination of value of investing in DVC has to take into account the cost that WDW charges for the rooms to non-DVC guests. If that were to drop significantly, that could eliminate value for DVC members.

 

[Dtw002]

What did the resale market do in 2008? Was there a significant drop in prices?

 

[Dtw002]

I also can't see dvc letting 1/4 of the resorts evaporate in 2042 as that would impact all of the other members. It's a big selling point that you have a big selection of places....to lose a bunch of them would be offputting to everyone.

If they offer an extension (albeit one you have to pay for) on a high demand property like Bcv or bwv, that would immediately increase its value. There's at least a chance they offer an extension on those properties down the road...

 

[a742246]

What did the resale market do in 2008? Was there a significant drop in prices?

It took about 18 months before prices started to drop significantly.

 

[DVC Doctor]

It seems that there are too many variables to account for.

This is not rocket science or brain surgery. The equation is pretty simply.

Cost to buy + Cost to maintain - Value when sold = True cost

Some people can pay cash (always the best way to buy) or finance (add in interest to cost to buy) and some even account for a time value of money. Some contracts come loaded with banked and current years points and you would subtract value of at least $12pp for those.

So, for example, you buy 100 points BWV for $100pp (including closing costs) and annual dues is $6.47 (I will round to $6.50)

$10,000 to buy + $650 per year (25 years to go) is your cost and you can keep adding the annual dues to the total each year

Renting is around $14pp or $1,400 per year

Buying saves $750 per year over renting and represents a 7.5% ROI (this is way better than any bank or CD or bond or dividend paying stock)

Thus, if you keep it for 13 years, your cost drops to $0 and if you sell for $11,000, then you just made a $10,000 profit (assume $1,000 in closing costs)

There are lots of ways to spin it, but paying cash is the best, keeping it for around 10 years is ideal, and under those situations, your risk is very minimal and you will probably make money on the deal when you sell and for sure you will be better off buying than renting for 10 years or paying Disney cash rates.

The people that lose money are the ones that buy new from Disney, pay a minimal down payment, finance a large amount, and then sell in under 5 years or less.

 

[Dean]

Your example doesn't seem to account for the initial investment cost per point. Maintenance fees are one thing, but in order to own the points, you had to buy the contract in the first place. Also, if the economy tanks, and prices come down, isn't likely that the amount you can charge per point for renting will drop as well?

One needs to look at all the variables including the Time Value of Money/Opportunity costs. Historically rental prices haven't tracked sales prices well.

It seems that there are too many variables to account for. But with a definite contract end date, the longer one waits to make the initial investment, the lower the price per point has to drop to make the purchase worthwhile. But then you still have to take into account the annual dues, which will probably always increase. Also, any determination of value of investing in DVC has to take into account the cost that WDW charges for the rooms to non-DVC guests. If that were to drop significantly, that could eliminate value for DVC members.

There are a number of points along the way but until one can understand them and how they fit into their personal situation, they are not ready to buy. The first question, and really the most important, is whether buying DVC at all makes sense. It really does for only a small % of people. Then comes which resort, UY, # of points and the like; all important but less than the initial question.

What did the resale market do in 2008? Was there a significant drop in prices?

I recall an offer to sell me points at VWL at $42.50 per point on 150 or 160 points.

 

[KAT4DISNEY]

What did the resale market do in 2008? Was there a significant drop in prices?

Best prices I recall were not until 2011 or so.