When will points cost start dropping?

[Rozzie]

good point Dean.

So you really don't see extensions happening? I will always put money on whatever you have to share!

Your depth of knowledge on the industry is admirable!!!

 

[Jen D]

I think though if the next resorts are monorail DVCs, like Contemporary or even the Poly, with the extra years, those will immediately become the most coveted resales and will certainly demand the highest prices.

 

[Maistre Gracey]

I think prices will start falling as soon as the ROFR price point decreases. Current prices aren't where they are because individual buyers were bidding up the price. They are where they are because Disney is the 800 pound gorilla in the buying pool.

I disagree. My thoughts are that ROFR has little to do with selling price, and everything to do who buys the contract.
The value of something is determined by what people are willing to pay. In the case of DVC, people are willing to pay $85/pt. Why would that change just because DVC no longer wanted first dibs on the contract?

I voted never, but depending on inflation of dues vs hotel room, it could happen with a year or two left.

MG

 

[JimMIA]

I think prices will start falling as soon as the ROFR price point decreases. Current prices aren't where they are because individual buyers were bidding up the price. They are where they are because Disney is the 800 pound gorilla in the buying pool.

At the risk of disagreeing with MG, I have to agree with this. ROFR artificially inflates resale prices, and it is the only thing holding prices at their current levels. Disney uses ROFR to prop up the resale prices so they can sell "new" at a profitable price point. If there were too much difference, nobody in their right mind would buy new from Disney.

To see ROFR in action, just watch what happens with the recent price increase. You'll see about a month of ROFRing at current levels, so as not to penalize folks with contracts in the ROFR pipeline, and then you'll see the ROFR points move up about $3. We saw that in the last price increase, and it continued even after DVC offered the 15% F&F discount.

Without ROFR, DVC resales would probably sell in the same range as the other premier timeshares...maybe a little lower, because of the limitations and price issues associated with trading out.

 

[hwystr]

As part of my recent analysis to buy into DVC (and the relative value between an existing BCV or new SSR), I built (2) financial models to evaluate what the appropriate DVC membership residuals should be based on replacing an annual $1800 vacation at a WDW resort and then renting my DVC membership at $10/pt (the going rate).

To build the model, I had to make a few assumptions
-WDW hotels go up 7%/yr, DVC maint goes up 5%/yr,
-cost of capital=10%, early exit costs are 10%
-DVC perks=$100/yr, DVC value is zero at end of contract.

Assuming the above assumption set, I found that the residuals are still priced at a discount between 40-60%, which seems reasonable as most owners won't be able to get 100% of membership pts used 100% of the time.

BCV residuals will peak in 26yrs then start declining. SSR residuals don't really start to seperate from the BCV residuals until ~20yrs, and don't start declining until ~35yrs, in my opinion not worth it if you don't love SSR.

There you have it, if my assumptions hold true, the results should be close.

 

[debloco]

Most RTU timeshare start to drop around just under 30 years but it depends on where DVC is in terms of sales and ROFR actions.

I am not sure which "way" this is figured...
does this mean after 30 years of use (so from the start year) or 30 years back from the ending year?

To use my home resort, VWL, as an example

Start year 2000

30 years from start year is 2030

30 years from end year is 2012

Not that it really matters to me, I'm just wondering.

 

[Mississippian]

Most RTU timeshare start to drop around just under 30 years but it depends on where DVC is in terms of sales and ROFR actions.

Dean,

I think you are right on the money on the 30-year mark.

Back in college, when I was being taught in business class how to value a bond, we were told to ignore the present value of the corpus if it was over 30 years out. The only factor was the income stream.

I really think the same is true for DVC. As long as you have more than 30 years to go, then a 40-year timeshare really isn't worth less than a 99-year timeshare.

Obviously 54 years is better than 40 years, whatever the actual figures are. If you calculate the personal value of staying at BWV or BCV, where you can walk to the parks and have lots of dining options, it's certainly worth a few hundred dollars a year. Take what the convenience is worth, invest that amount additionally in the stock market, and in 40 years you will have enough money to buy whatever you want. Of course, I'll be so old that I will be using the money for my nursing home!

Just to give an example, I just found a savings calculator on the Internet. If you save $500 per year in a tax-free IRA or other tax-free account at 12 percent (the stock market's average return over the last 75 years) you end up with $523,143 in 40 years.

Here's the link if anyone wishes to play with it:
Savings calculator

 

[DisFlan]

Who thinks weather might affect future DVC purchases? We've had a few bad hurricane years. If we have four or five more bad years, is this going to put people off buying DVC? Or anything else in Florida? Yes, I know, the storms we've had haven't done much damage to the WDW resorts, but will a run of "bad" years start affecting the views of buyers? And will it affect price? Or future projects? It's a good thing VB wasn't "Gulfport Beach Resort", but it's still in harm's way. And HHI is always going to be in a vulnerable spot.

As for "when will prices start falling", I don't really care. We'll stay as long as we can. By 2042, we'll be too old to care (94 and 100, if we're still around). Our son's name is on our contract - he can worry about it.

DisFlan

 

[Dean]

I am not sure which "way" this is figured...
does this mean after 30 years of use (so from the start year) or 30 years back from the ending year?

To use my home resort, VWL, as an example

Start year 2000

30 years from start year is 2030

30 years from end year is 2012

Not that it really matters to me, I'm just wondering.

Just under 30 years remaining, somewhere in the 2014-2017 range. But it will be relative and depend on a lot on where DVC is with ROFR and new sales. And initially it may simple be a mild widening of the gap between retail and resale and not a true reduciton in the price.

 

[Dean]

good point Dean.

So you really don't see extensions happening? I will always put money on whatever you have to share!

Your depth of knowledge on the industry is admirable!!!

I feel many people don't understand the financials involved here. Ignoring the benefit to Disney in general of having a captive audience weekend and week out, I simply don't see it happening. Lets assume Disney wanted to extend all of DVC to the 2054 time, an extra 12 years. They woudln't be able to sell it new for 12 years or less, at least not reasonably. And to justify doing so, they'd need a high percentage of owners to extend, likely 75% or more. And getting that amount of participation would take doing it for free or nearly so. I'd say the max would be some where around $10 per point would be the max one could look at. But to be honest, this is one of many things I'd love to be wrong about.

 

[Dean]

Dean,

I think you are right on the money on the 30-year mark.

Back in college, when I was being taught in business class how to value a bond, we were told to ignore the present value of the corpus if it was over 30 years out. The only factor was the income stream.

I really think the same is true for DVC. As long as you have more than 30 years to go, then a 40-year timeshare really isn't worth less than a 99-year timeshare.

Obviously 54 years is better than 40 years, whatever the actual figures are. If you calculate the personal value of staying at BWV or BCV, where you can walk to the parks and have lots of dining options, it's certainly worth a few hundred dollars a year. Take what the convenience is worth, invest that amount additionally in the stock market, and in 40 years you will have enough money to buy whatever you want. Of course, I'll be so old that I will be using the money for my nursing home!

There are many examples of timeshares out there that are RTU including some top ones that were sold when they only had 30 years remaining when they were new.