Resale value in 15 years?

[JerseyBob]

I know that no one can predict what the resales will be worth in the future, but can a fair assumption be that in 15 years resales will be at least worth what they are today? I'm still trying to justify the expense of becoming a member and one way to justify it in my mind is that I'll part with the $12,600 (150 points) for say 15 years and then recoup the cost when I sell and I'll have had great accommodations for all the years for the cost of the maintenance fees.

 

[Dean]

Actually I think it's a fair assumption that a DVC resale will NOT be worth what it costs from DVC today. How much less depends on many variables like whether DVC has new resorts to sell and the ROFR issue.

 

[CarolMN]

I think it is quite a stretch to assume that in 15 years DVC will be worth about what you paid this year. Of course, that is JMHO.

DVC is not a financial investment - it's a pre-paid vacation plan. If you are buying in thinking that you will get all or even most of your initial purchase price back in 10 -15 years when you sell, I think you are setting yourself up for disappointment. It is true that many of those who bought DVC during the first 10 years or so have been able to recoup their initial investment, and in some cases, have even "made a profit". However, that is primarily due to Disney's support of prices. Without Disney exercising its ROFR to support the sale of the newer DVC resorts, I doubt even those early bird sellers would have made much of a profit. At some point, Disney will stop exercising its ROFR on the resorts with a 2042 end date. At that point, I believe prices will fall significantly.

There are many reasons to buy DVC. IMHO, getting your money back later is not one of them.

JMHO. Others may disagree.

 

[vernon]

I think it's impossible to say, it really does depend on the cost of hotel rooms at WDW. If they stay at this level (or fall) then I think you'll struggle to recoup your initial cost ( don't forget to factor in the cost of having the money "invested" for that time as well, dues are not your only "cost" even if you recoup your $12,600 in full in 2019). With a moderate inflation rate in hotel costs, I believe you should get back more than you put in, in the unlikely event hotel prices rocket then you should see a very healthy profit on your "investment". My money would be on a moderate to slightly higher increase in room rates over the next 10-20 years, somewhere between 6-9%.

Because of the difficulty of trying to guess the future value, I decided to take the opposite view and start from the front end. I.E. I know with some certainty would my expediature would be over the next 4/5 years so I could say with reasonable certainty that had I not gone the DVC route I would have paid out the same amount in 7 years as I did with DVC, but going the DVC route I had an "asset" at the end of it. From that break even point I truly was having vacations on dues alone and IF I chose to sell the DVC at some time in the future, I recouped what I recouped.

You can do the maths of what you think that might be until you're blue in the face, but it's only ever going to be a guess.

 

[PamOKW]

You'll find many, many times in the DVC paperwork that they warn against purchasing as an investment. I almost didn't buy early on because I figured the price would come "down" in a few years. (DUH!) We've been lucky that the resale prices have actually gone up but it's not something that I would count on happening in the future.

I would look at it more as what you spend/will spend on regular vacations versus what DVC costs you and the comparison of the accomodations.

My personal way to look at it has been to think of it as a car. You can buy a Kia or you can buy a Maserati and both will get you around and you can be very happy with the Kia but if you can afford the Maserati and like that more, go for it. You can find less expensive ways to vacation at WDW or you can go for the Maserati.

 

[tvwalsh]

We will be staying at OKW for 328 pts in a two bedroom for 12 days from Jan 11 to Jan 23. The cost of this stay through central services at WDW is $6500. Unless this price starts to come down during those next 15 years, I think our DVC points will maintain their value.

 

[Maistre Gracey]

I think DVC will maintain the same numerical dollar value almost to the very end.
Let's fast forward to the year 2041. How much would you pay for DVC with only one year left?

A rough guess suggests that in the year 2041 all prices will be about triple of today's prices. That means a $250 room rate (tax included) will cost about $750. Of course, this also would mean that a $4/pt maintenance fee would now cost $12/pt.

To spend a week in the hotel room will cost $5250 per week. A DVC studio will still "cost" 106 points. At $12 per point in maintenance fees, the weekly cost (maintenance fee only) would be $1272. This leaves $3978 left over for the cost of points. If we then divide that figure by the 106 points needed to stay for the week, we see we could spend $37 per point and still come out ahead.

As we can clearly see, in the year 2040 a resale could easily sell for $70 per point, and still be a good deal. For that matter, in 2039, $100/pt is not unlikely.

In summary, the numerical price of DVC may never decrease. If you factor inflation, at some point the true value of DVC will decrease.

 

[dianeschlicht]

In 15 years, if I decide to sell my contracts, I will think anything I get will still have been worth it, since I purchased to enjoy years of Disney vacations. When I am no longer able to do that, if I can sell it, anything I get will be gravy!

 

[timC]

For DVC, all of their timeshares are basically in the same market, so they'll have to prop up the resale values, using ROFR, at least until they finish building/selling at WDW. They'll want new resorts to maintain price competativeness, plus some other advantage (eg. 50yr term) to help sales.

Once they're done, I think they'll let the resales...and the sales...go.

That said, if they're still building timeshares at WDW in 15 years (in can't even begin to image WDW in 15 years), I think you're capital is relatively safe... otherwise, I would expect some recovery, but all of it.

I'm not a timeshare expert, and this seems to be timeshare ecomonics 101 principles at work here. Mabybe the TS experts on this board can tell us tell us how resort prices typically transition from retail to resale...

 

[Maistre Gracey]

Originally posted by timC
For DVC, all of their timeshares are basically in the same market, so they'll have to prop up the resale values, using ROFR, at least until they finish building/selling at WDW.

It is my belief that the high cost of the on-site Disney resorts will prop up the resale price of DVC.
In other words, if folks are willing to pay the big bucks for on-site hotels, there will be a competitive market to purchase the DVC villas, thus demand will keep the resale prices up.

 

[TheRustyScupper]

1) We are forgetting a significant truth.
2) The price of ANYTHING is not what the seller wants.
3) The price is what the buyer is willing to pay.
4) As the years of use diminish, the buyer would spend less.
5) The price/year increases significantly in the waning years.
6) The price MUST go down as the perceived value is less.
7) The ONLY question is what will be the perceived value.
8) At some point, DVC will not build more timeshares.
9) At that time they will not artificially keep the prices high.
10) Without ROFR to inflate the cost, resales cost less.
11) At that time, resales will be as other timeshares.
12) I would assume the resale value to be 1/3-1/2 of original.

 

[Maistre Gracey]

Originally posted by TheRustyScupper
1) We are forgetting a significant truth.
2) The price of ANYTHING is not what the seller wants.
3) The price is what the buyer is willing to pay.
4) As the years of use diminish, the buyer would spend less.
5) The price/year increases significantly in the waning years.
6) The price MUST go down as the perceived value is less.
7) The ONLY question is what will be the perceived value.
8) At some point, DVC will not build more timeshares.
9) At that time they will not artificially keep the prices high.
10) Without ROFR to inflate the cost, resales cost less.
11) At that time, resales will be as other timeshares.
12) I would assume the resale value to be 1/3-1/2 of original.

Using the math, I stand by my earlier post.
DVC will NOT fall to the 1/3 level. If that were the case, someone would pay 3 times as much not to buy into DVC. I understand why this holds true for current sales, but in the last few years of DVC, there is no commitment. The buyer is only buying two or three vacations, not 39.

 

[Lisa P.]

In 15 years, today's DVC points will only have ~23.5 years left. Even if DVC is selling DVC points at that time, they may not have a reason to persist with ROFR on older points contracts. When timeshares don't exercise ROFR, they typically depreciate to 25%-75% of original purchase price. This is especially true of RTU contracts and resorts in overbuilt areas. Just food for thought.

Buy with the intent to use it, not to invest your money for the potential future return. If you cannot afford to buy with that uncertainty of return, then perhaps it's not wise for you to buy it.

If you expect to spend cash for many years to come, to stay at Disney Deluxe hotels or DVC condos at least every other year and you don't normally spend just long weekends or Christmas/Easter vacations there, then you may find it very worthwhile to buy into DVC.

If you are uncertain about being able to afford Disney trips that often (there's also travel, park passes, food and other expenses to consider), perhaps the longer term, DVC commitment is not for you. There are many ways to enjoy nice Disney vacations! DVC is just one. HTH.

 

[eva]

I was kind of wondering what the resell price will do here in just a few years with SSR opening soon. Will it be less attractive to purchase points that expire 12 years sooner than points purchased through DVC? If DVC starts offering incentives at SSR what then? I know that if I was in the market to buy I would be prorating everything.

For example:
Resell 200 points at $70 = $14,000 divide by 39 years = $358.97
DVC 200 points at $89 = $16,800 divide by 50 years = $356.00

I would buy through DVC in this scenario. It is cheaper per year and I don't have to pay closing cost. The only way that a resell would be a better buy is if it had a large number of banked points.

Maybe my reasoning is all wrong. But I bet that a lot of people are going to calculate it that way. Even if the resell that I showed in the example had 200 banked points it only makes it a bit cheaper per year, about $350 per year. With closing that would make it about even.

 

[Dean]

Originally posted by eva
I was kind of wondering what the resell price will do here in just a few years with SSR opening soon. Will it be less attractive to purchase points that expire 12 years sooner than points purchased through DVC? If DVC starts offering incentives at SSR what then? I know that if I was in the market to buy I would be prorating everything.

For example:
Resell 200 points at $70 = $14,000 divide by 39 years = $358.97
DVC 200 points at $89 = $16,800 divide by 50 years = $356.00

I would buy through DVC in this scenario. It is cheaper per year and I don't have to pay closing cost. The only way that a resell would be a better buy is if it had a large number of banked points.

Maybe my reasoning is all wrong. But I bet that a lot of people are going to calculate it that way. Even if the resell that I showed in the example had 200 banked points it only makes it a bit cheaper per year, about $350 per year. With closing that would make it about even.

Everyone will look at this differently. Others will look at home resort and others at the total price. In the above example, there's about a $3500 difference. Note that you did multiple wrong and the total price for SS is $17900 for 200 pts, making it more pp per year.

Also note that one of the main issues that makes the 7 month window work is the building of new resorts with extra inventory and the desire of other members to try the new resorts. No more new resorts, at least truly desireable ones, will make the 11 month window far more important and the 7 month window more difficult by far.

 

[Dean]

After I completed my post I went back and rechecked all the math. The per point per year is accurate, just the total price of the SS is miswritten.

 

[timC]

Now that we've got a good statistics thread going, let me jump in here. I will compare buying vs renting, by expressing the selling power of a resale, as a ratio against rack-rate. Then I will predict the resale price 15 years from now.

The theory is that in 2003 a resale goes for X times the rack rate, and represents the buyers price tolerance... In 2041, clearly a buyer would only pay 1 times the existing rack-rate. So. What about 15 years from now?

Assume:
- 1br Boardwalk 1wk, rackrate = $3045
- 1br Boardwalk 1wk=252 points
- Resale purchase of $72 X 252 = $18144

The current ratio between the resale example, and the rackrate example is about 6:1.

Now, assuming in 2041, the ratio will be 1:1, you can now conduct regression analysis on this...I'll spare you the goary details.

ANSWER: In 15 years, the ratio between resale and rack rate will be about 4.5:1. Therefore, (in todays $$) the price per point will be approx (3045X4.5/252), which equals $54.

Disclaimer: I did some rounding. Also I used a linear regression, which is not a precise reflection of future trend.

 

[vernon]

Tim, I have trouble following your calculations, but if I'm right using an inflation rate of 5% PA am I correct in coming up with a figure of about $116 per point in 15 years time and how would your "value" be effected if you calculated on 5 days ( Sunday to Thursday nights) instead of a whole week. ( I make it a value of over $100 per point in todays $$$ and more than $200 in the $ of 2020) .
IMHO if you use a "value" of $54 ( in today's value) as the "worst use" of the points and $100 in the "best use" (although using a studio as your "constant value" would produce a higher "real value" ) one comes up with a value in "real terms" in the region of $70-80 per point in todays $$

 

[Maistre Gracey]

Nice job, Tim. I would think that $54 price in 15 years will be closely equate to what it sells for today.

I believe there is another factor here. As we get closer to 2042, there is less commitment for a long term, more expensive purchase. Do you think this might raise the demand for DVC in the latter years?

 

[timC]

Vernon. In my calculations, I use ratios and express then in today's $$ only. I do not factor inflation. It would complicate the math. I made an assumption that inflation rate would have the same impact on both rackrate and resale prices.

There are a lot of factors that would impact future prices. DVC has some levers they can pull, including ROFR, keep building, pricing policies, etc. Out of their control would be, inflation, demand for consumer vacation trends, etc.

Bottom line.... We'll just have to wait 15 years to find out...but in the mean time, WELCOME HOME!