Resale Market Outlook

[Dtw002]

How low did they go. 1/2 of the former market rate?

 

[Brian Noble]

You can probably go back and look at old ROFR threads and figure it out.

 

[Dean]

How low did they go. 1/2 of the former market rate?

Roughly 50 to 60% for the Resorts routinely available resell at the time including Saratoga Springs and animal kingdom. Comparing to today's prices.

 

[keishashadow]

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

Re 'the market' if you haven't bought high & sold low @ least once, you are in the minority lol

Honestly, I don't look at DVC as a traditional investment. If my memberships are 'worth' something when the time comes that I no longer care/can utilize them, will gift to my adult children.

Conversely, they are a huge asset to me via intangible ways. Started out purchasing as an incentive to get the workaholic DH to actually take a vacation! Now, he is as big of a WDW fan as me.

I bought direct and have resale contracts too, all have increased in theoretical value if you compare to asking price on the broker websites, even an AKV one that was purchased just a few years ago.

That said, I would never buy into DVC with more than the expectation of utilizing the points for upcoming vacations

 

[BK2014]

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)

Maybe it is simple and I am just missing the point, but the question from OP, as I understand it, was is it possible to know whether or not there was a way to predict what DVC prices might do in the future, so that one can know whether or not it makes more sense to buy now, or hold out? That requires being able to predict a number of changing variables.

The math you posted is correct, but it assumes that those variables are constant. Annual dues are $650 a year, right now. But they are subject to change. Renting pays about $14/pp, but that is subject to change. Both of those variables could go up or down significantly over the life a contract. And it doesn't seem, to me at least, that the per point value of renting is necessarily directly correlated to any of the other variables.

So while your math makes sense, using today's numbers, your conclusions are only true if those numbers remain constant or they all increase or decrease in direct proportion to each other.

 

[supersnoop]

In simple, basic terms, a timeshare is an inflation-adjusted annuity. Value should always be consistent with the number of years remaining. The only way to time the market is if you have inside information about future events. The argument now: would a potential downturn in the economy reduce prices more than the savings realized buy purchasing now. That seems unlikely. Prices would have to drop more than 10% per year for the next several years for timing to be a viable plan.

 

[DVC Doctor]

Maybe it is simple and I am just missing the point, but the question from OP, as I understand it, was is it possible to know whether or not there was a way to predict what DVC prices might do in the future, so that one can know whether or not it makes more sense to buy now, or hold out? That requires being able to predict a number of changing variables.

The math you posted is correct, but it assumes that those variables are constant. Annual dues are $650 a year, right now. But they are subject to change. Renting pays about $14/pp, but that is subject to change. Both of those variables could go up or down significantly over the life a contract. And it doesn't seem, to me at least, that the per point value of renting is necessarily directly correlated to any of the other variables.

So while your math makes sense, using today's numbers, your conclusions are only true if those numbers remain constant or they all increase or decrease in direct proportion to each other.

We can't predict the market perfectly, BUT since 1991, the 25 year history of DVC new and resale prices have gone up EXCEPT for a 2008-2012 recession correction. Disney prices started around $48pp and are now $170pp, resale prices usually held about 85% Disney prices until the 2008 recession and we saw resale prices drop to below 50%, however since 2012 or so, the resale prices have recovered very nicely.

If you bought new or resale at anytime in the past 25 years and used it as it is intended or rented the points over a minimal 7 year period, you are probably in the PROFIT zone, with the only exception of people paying 10% or more in financing loans. Even with loans, if people used a HELOC, they are still better off buying rather than renting.

However, at today's new Disney prices of $170pp, it is really hard to justify that expense vs resale, but it still represents good value at Poly and VGF.

In my opinion, there is no reason to HOLD off buying unless you really can't afford to buy it or need to take on expensive financing.

As far as renting prices, the old standard of $10pp held for at least 10 years or so and only recently have they gone up to $14pp. It seems to go up in steps, and not a constant curve.

Annual dues is a wildcard and sometimes goes up 55 or more and sometimes 2% or less. The safe bet is to assume they will go up a constant 4% every year.

The important number is that the SPLIT between paying annual dues vs renting has been in the $6-7pp range with less for distressed points and more for spec renters.

 

[Dean]

Maybe it is simple and I am just missing the point, but the question from OP, as I understand it, was is it possible to know whether or not there was a way to predict what DVC prices might do in the future, so that one can know whether or not it makes more sense to buy now, or hold out? That requires being able to predict a number of changing variables.

The math you posted is correct, but it assumes that those variables are constant. Annual dues are $650 a year, right now. But they are subject to change. Renting pays about $14/pp, but that is subject to change. Both of those variables could go up or down significantly over the life a contract. And it doesn't seem, to me at least, that the per point value of renting is necessarily directly correlated to any of the other variables.

So while your math makes sense, using today's numbers, your conclusions are only true if those numbers remain constant or they all increase or decrease in direct proportion to each other.

DCV, like any timeshare is a risk and a liability. Like resort areas in general, they will carry more risk and have more volatility in times of uncertainty and economic downturn. Think CA real estate on steroids. The risks are many and the lost resale value is really the least of it and only applicable if one decides to sell. If room prices decline sufficiently and/or there are enough/large enough discounts, it could erase any potential savings of owning. If inflation for the areas involved ramps up, that will likely be the largest risk. Timeshares don't track regular very well, even when things were stagnant, timeshares tended to increase yearly. Historically rental prices haven't tracked sales prices and have tended to lag significantly in that area so one is unlikely to keep up by renting if up dues ramp up. My feel is one needs to go through the financial exercise to see the realities of risk but in reality DVC is unlikely to save money and likely to cost more over time though hopefully with added value. One also needs to look at the rest of the their life situations and think, what happens if I lose my job among other major issues for example.

 

[gharter]

I'm new at this, having bought my first contract in the last year. If you are looking to purchase and sell and make money, I think it's a crap shoot in the short term. If you want to go to Disney over the next 10 years, i suspect it would be tough to lose money. At least thats how the numbers worked in our favor. If Disney keeps increasing the direct purchase cost, it only makes the resale market stronger.
At some point, as you get closer to the end of the contract, will the value of the contract go down? Of course. so far we are not at that point as we just purchased our second contract and are very happy with both purchases.

 

[DougEMG]

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 example is meant to show how much prices would have to drop over a short time period (1-3 years) to make waiting to buy worth while. The initial price doesn't matter. And over that time period MF and rental rates won't change enough to have a big effect. It is really just a case to give a frame of reference.

Personally I think that it is very hard to come out ahead by waiting to buy. Best case is that a major recession happens in the US and resale prices drop by $20-30. Problem is how many years till that happens.

 

[supersnoop]

Personally I think that it is very hard to come out ahead by waiting to buy.

The only way to come out ahead by waiting, in my opinion, is to wait for a loaded contract to come along.

 

[CarolMN]

.....(snip)....... Best case is that a major recession happens in the US and resale prices drop by $20-30. Problem is how many years till that happens.

And if/when that happens, who can say that today's potential buyer will still be in a position to buy? As they say, past performance is no guarantee of future results.

 

[Dean]

The only way to come out ahead by waiting, in my opinion, is to wait for a loaded contract to come along.

I would agree up to a point but this is not waiting timing the market as is the question here but rather patience to get a good to great contract. This should be a few months vs a few years timeframe difference if timing the market.

IMO the best waiting is to become truly knowledgeable and educated, IMO that usually takes around 6 months of active investigation. Some that follow resales more closely tend to feel fully loaded contracts are less common and more difficult to get now. Assuming buying makes sense for the individual anyway, if one can get a fully loaded contract within a reasonable period of time, I'd agree. However, waiting 2 or 3 years trying to find one at a good price is penny wise and pound foolish. My view is to become educated by first determining if DVC is a good fit (inc. use ONLY at DVC resorts at least every 2 yrs), if one can afford it (my view, that means pay cash and no consumer debt) then one has to determine what DVC to buy (home resort, UY, # points). Once one is to the point of being ready to buy, the issues of loaded vs stripped and of price (within reason) are less but still important IMO. There is a cost in waiting if the rest of the assumptions hold true as well, one way to quantify that cost is to calculate the difference between a private rental and owning for one's planned trip(s). The difference on the extremes between a fully loaded and fully stripped contract is in the range of $20 per point roughly but realistically one is looking at more in the $10 a point difference range since most contracts are not completely stripped and getting a fully loaded contract in one's hands to use the extra points in a meaningful way is difficult.

And if/when that happens, who can say that today's potential buyer will still be in a position to buy? As they say, past performance is no guarantee of future results.

But it's all we have besides our set of general assumptions. I'd turn your statement around and ask myself if certain bad things happen, do I want to own a timeshare anyway. Truthfully we see relatively frequent posts from those that likely shouldn't be buying a timeshare but do anyway. That's part of the risk management side of things that everyone should consider before buying any luxury item.

 

[BillPA]

A simple answer is, if you have to finance it, you can't afford it, no matter how low the price is.

 

[DVC Doctor]

A simple answer is, if you have to finance it, you can't afford it, no matter how low the price is.

I normally agree with you, but there are exceptions, such as buying a home with a mortgage or buying a car with a 0.9% loan, or buying DVC with a 4% HELOC, etc.

I think what you should be saying is if you have to finance it with 5% or more interest rates, then you can't afford it.

 

[BillPA]

I thought the topic was referring to buying DVC, you don't NEED to have a timeshare.

 

[Dean]

I normally agree with you, but there are exceptions, such as buying a home with a mortgage or buying a car with a 0.9% loan, or buying DVC with a 4% HELOC, etc.

I think what you should be saying is if you have to finance it with 5% or more interest rates, then you can't afford it.

My personal view would be that a mortgage in certain situations is the only thing one can justify and that includes zero % cars or CC and I certainly wouldn't put my home at risk for a timeshare no matter the interest savings. Better to pay 14% than to do so comparatively speaking IMO.

 

[DVC Doctor]

My personal view would be that a mortgage in certain situations is the only think one can justify and that includes zero % cars or CC and I certainly wouldn't put my home at risk for a timeshare no matter the interest savings. Better to pay 14% than to do so comparatively speaking IMO.

I guess we can agree that we disagree on this issue although we both agree that people should NOT buy into DVC unless they can safely afford it and that is a very subjective issue.

But I would rather put a $25,000 DVC loan on a HELOC at 4% rather than $25,000 at 14% interest as the savings is 10% per year and those numbers are HUGE. I get the concept of not putting your homestead at risk for a timeshare, but you are putting yourself at risk with 14% interest loans, although you can bankrupt that loan without loosing your home. Lots of people use HELOCs for prudent spending and reasonable loans, rather than using outrageous private financing rates.

 

[Dean]

I guess we can agree that we disagree on this issue although we both agree that people should NOT buy into DVC unless they can safely afford it and that is a very subjective issue.

But I would rather put a $25,000 DVC loan on a HELOC at 4% rather than $25,000 at 14% interest as the savings is 10% per year and those numbers are HUGE. I get the concept of not putting your homestead at risk for a timeshare, but you are putting yourself at risk with 14% interest loans, although you can bankrupt that loan without loosing your home. Lots of people use HELOCs for prudent spending and reasonable loans, rather than using outrageous private financing rates.

IMO there is no prudent spending involving financing for luxury items. If you can't pay for it you can't afford it, it really is that simple The risk to the home is a larger issue to me than the interest rate comparatively speaking.

 

[Dtw002]

I think it's two different questions. 1) is whether you can afford it and 2) is now a good time vs the future.

#2 it seems like the consensus is a major economic downturn is the only way prices fall signicantly, which are hard to time. Or 15yrs or less on the 2042 resorts.