When Will Resale Values Drop?

[FriendsOfEeyore]

Ok, another thread inspired by SSR. Per Doc, at this week's Member's Update, DVC announced that they are selling a limited number of OKW points with a March UY. How long will DVC continue to exercise it's ROFR on it's non-ssr properties? DVC is currently controling the resale price, by purchasing any of the very low offers.

I would think that there will be an add-on boom once DVC is no longer purchasing these resales.

When does the 2042 end date begin to impact the resale market, knowing that one can buy directly from DVC and receive a 2054 end date?

Resale prices have escalated to the low $70s. How many years before they return to the $60s?

Just thoughts from a BCV Member that will likely add-on in like 5 years at one of the four 2042 onsite properties.

Edward

 

[Granny]

This has been bounced around quite a bit, and many believe that resale prices on the 2042 properties will not drop for some time yet. Some think they will begin to decline in 10 years, others in 20.

Assuming that DVD will continue to prop up the value through ROFR, my guess is that they will begin to lose resale value with about 15 - 20 years left. A lot of it depends on the cash cost of the resorts too. If they resume their pre-9/11 annual rate of increase, that too will help prop up the resale market.

IMHO, if DVD stops exercising ROFR, there would be an immediate drop in resale value...maybe $10 a point? And yes, at some point the 10 years extra at SSR will contribute to the diminishing value of the 2042 properties.

All my opinion...no particular facts or historical precedents in that guess.

 

[JeffPort]

Obviously, any answer to this question is pure speculation and dependent upon variables that cannot be predicted ahead of time.

One thing that will surely affect resale of the existing units is Disney's potential to saturate the DVC market with too many new properties. If Disney keeps building, at some point, demand will not keep up. That would have a particularly negative effect on the properties with a shorter life span remaining on the contract.

My assumption is that Disney won't over-saturate the market and that they will continue to ensure proper upkeep and amenities necessary to make DVC a cut above all other timeshare systems.

I made my purchase with the expectation that we are nearing the peak of the resale value escalation, but that the price will initially begin to fall slowly. I think a large portion of people buy into DVC with the expectation that they will use it through the childhood years of their growing families. Under that theory, I figure that new members on the resale market are looking to get about 20 years of expected use. Once we start getting closer to 20 remaining years, the price will start to fall more rapidly.

That said, only time will tell ...

 

[RobDoc]

Until Disney stops ROFR on existing resorts, the prices won't drop at all, IMO.

Once there are multiple resorts with the 2054 end date, I think DVC will lose interest in supporting the resale prices- but I don't expect this for another 10 years or so.

Using other timeshares as an example, once prices are allowed to drop, they will drop quickly and sharply.

I have purchased several weeks at traditional timeshares (two are on the DVC/II exchange list) for as little as $500 for the week - and none for more than $1500. All have annual fees ranging from $325- $450 per week. All are for 2BR villas- comparable (or larger) in size to OKW villas.

Stay tuned!

 

[rocketriter]

Of course, if you and/or your descendants plan to keep using the DVC until 2042, then the resale price is of no concern. All that matters is the annual cost per point compared to the cost of similar first-class accommodations on the grounds.

 

[RobDoc]

Originally posted by rocketriter
Of course, if you and/or your descendants plan to keep using the DVC until 2042, then the resale price is of no concern.

.... unless you plan to buy more points- then the price could be a very important issue!!

 

[Tagrel]

What I haven't seen mentioned in this ongoing topic is that while Disney may be keeping the resale value higher with ROFR, they would not be doing that unless they could then SELL those same points back to the public at current pricing. Why would they want to pay the maintenance if they can't sell them again? Thats what WE are for!

So, it really boils down to - how long is the general public willing to pay top dollar for the DVC properties that expire in 2042... And who is on the waiting list at each 'sold out' resort wanting to buy more points at current selling prices.

If ebay is an example of what people are willing to spend on things, it could be a LOOOONNNNNGGGG time!

 

[JeffPort]

Tagrel is right -- it's all about demand. Sure, Disney's ROFR is the mechanism used to keep the prices stable. However, Disney will only continue to do this at the current mid-60's price if Disney has the backside demand necessary to return the ROFR points to another buyer.

Disney isn't going to just start piling up ROFR contracts in order to keep the prices inflated on the resale market. Nor will they take a loss by reselling a ROFR contract for less than their purchase and transactions cost. Once buyers stop seeing "value" in the remaining years of an existing contract at the going price, Disney will be forced to drop the price for the 2042 units. This will naturally occur as we get closer to 2042, but it can happen quicker if Disney's desire to build new units outpaces the public's demand for those units. The value of our existing properties will always be competing with Disney's new DVC properties. If Disney can drive the market to a higher price for the new units (as has happenend in the past decade), the existing units will benefit. If Disney is forced to lower it's new unit prices, the resale market will suffer as well.

 

[FriendsOfEeyore]

See, this is exactly why I was asking. Thoughts like what Doc and Tagrel are saying.

I do believe that eventually the price will come down, but I have no guess as to how long DVC will support the higher prices. I am in no way looking to sell my measley little 200 pt contract. I bought for the full period to expire on Jan 31, 2042. My question, I think really relates to when we will see some good values on the resale market, similiar to what Doc has found at other timeshares.

$500 for a week... Doc, please tell me about these resorts. Are they the type of properties that will revert back to the management company at "x" date, similiar to DVC? Fixed or Floating weeks? What are the condition of the properties? Did you find the great rates, possibly as a result of the financial impact of the market adjustment that the country has been going thru?

I know that my mom has like 4 different timeshares. 2 your standard fixed week, 1 a floating fixed week, and a vacation club with options like the DVC. She is always looking to buy more options, but she does not have big cash to lay out.

Edward

 

[tjkraz]

Originally posted by Tagrel
What I haven't seen mentioned in this ongoing topic is that while Disney may be keeping the resale value higher with ROFR, they would not be doing that unless they could then SELL those same points back to the public at current pricing.

I agree with your point, but let's take it a step further. DVC also has NEW resorts to sell, meaning it's in their best interest to keep prices inflated across the board.

In other words, if someone could get OKW for $50 per point, why would they even consider SSR at $89 per point? Even if DVC has to maintain break-even pricing, or take a small loss on a resale contract, they may be forced to do so in order to keep more and more people from turning to resales.

Eventually the extended contracts of SSR and future resorts will play a greater role in the buying decision, but that point in time has to be 15-20 years down the road.

 

[Niagara2]

On the bright side here if resale prices drop dramatically in 20 years, we can all buy a whole lot more points and spend more retirement time at our homes away from home!!

 

[RobDoc]

$500 for a week... Doc, please tell me about these resorts. Are they the type of properties that will revert back to the management company at "x" date, similiar to DVC? Fixed or Floating weeks? What are the condition of the properties? Did you find the great rates, possibly as a result of the financial impact of the market adjustment that the country has been going thru?

These were both at resorts where some owners have stopped paying their annual fees and the owner's association has reposessed the weeks. These weeks are fare more valuable to the owner's association when they are generating maintenance fees- since most of these resorts have limited opportunity for rental (and no reservation system like DVC). In addition, the developer and sales staff have been gone for years, so these resorts have no easy access to potential buyers. Thus, they simply offer them at a rate to cover the legal fees to record the deed and minimal marketing costs.

French Lick Springs Resort (IN), The Rushes (WI), Pettit Crest Villas (GA) are some that have offered inexpensive weeks in recent years. Many others have similar programs directly thru the resort. (French Lick has recently upped their price since a casino will be going in 1/2 mile from the resort.) These are all week-based ownerships with no end date. All of these resorts are in good physical condition with nice amenities and large villas (all are 2BR villas- sized like OKW) ... BUT ... I consider all of these resorts to be inferior to DVC in both location, style and maintenance. (All of these were built in the early to late 80's).

With most typical timeshares, their resale value drops immediately after purchase to less than 50% of the original sales price and after 10 years will sell for 25% or less (if at all). All of the ones I own originally sold for $15,000 - $25,000 and I've paid no more than $2,500 for any of them.

I agree with tjkraz that Disney's incentive is more related to a desire to minimize competition for their active sales than an opportunity to make $5-10 per point on a ROFR purchase and sale as an add-on.

 

[Maistre Gracey]

I am likely in the minority here, but I think resale prices will stay respectable after the end of ROFR.
As long as the cost of staying at the on-site deluxe resorts stays high, then I believe that will help keep the value of DVC high.
In other words, if the price of DVC got too low, it would create more demand for DVC from the guests paying deluxe prices, thus driving the price up.

I am not sure how to word that so my meaning flows smoothly, so I hope you get my drift...

MG

 

[manning]

So, it really boils down to - how long is the general public willing to pay top dollar for the DVC properties that expire in 2042...

Hopefully Disney will be smart enough to keep the demand up, ie maintain the parks and Disney World at a high standard.

Also once you have gone past your break even point, it wouldn't matter. You haven't lost anything. Your profit, if any, just gets less.

 

[Shamus]

Originally posted by Maistre Gracey
I am likely in the minority here, but I think resale prices will stay respectable after the end of ROFR.
As long as the cost of staying at the on-site deluxe resorts stays high, then I believe that will help keep the value of DVC high.
In other words, if the price of DVC got too low, it would create more demand for DVC from the guests paying deluxe prices, thus driving the price up.

I am not sure how to word that so my meaning flows smoothly, so I hope you get my drift...

MG

Well MG, you can put me in the minority then also because I get your drift and in fact have been trying to relay the same message on these boards for a number of years now. IMHO Disney's ROFR is not the major influance of resale prices for DVC.

IT IS THE FUTURE COST OF ROOMS AT WDW that has and will have the most direct impact on the resale prices of DVC.

If we see the return of pre 9/11 anual price increases at WDW resorts I would expect to see Resale prices continue to rise at least until 2025 for the most part.

And Remember as others have stated before on these boards..............Disney's ROFR MAY be holding the bottom for Resales, but their current sales ARE capping the Top.

Just my .02
Shamus

 

[DVCPAT]

Originally posted by Maistre Gracey
I am likely in the minority here, but I think resale prices will stay respectable after the end of ROFR.
As long as the cost of staying at the on-site deluxe resorts stays high, then I believe that will help keep the value of DVC high.
In other words, if the price of DVC got too low, it would create more demand for DVC from the guests paying deluxe prices, thus driving the price up.

I am not sure how to word that so my meaning flows smoothly, so I hope you get my drift...

MG

I agree. I also think a shorter term contract may appeal to a large number of people who question a 50 year commitment to WDW. The selling price of DVC will always correlate with WDW resort rates.

 

[tjkraz]

Resale values in the later years may be largely dependent upon the level of dues at that point. If it so desired, DVC COULD schedule full building rehabs in the latter years of resort ownership, the cost of which could be passed along to members.

In other words, if DVC knows that it will again be able to sell millions of points at OKW, BCV, BWV and VWL starting in February 2042, they could begin rehabbing the resorts several years before that. Such a plan would enable them to max out the 15% annual increases in dues for a number of years, while returning the resorts to pristine condition, ready for resale.

Would this really happen? Who knows. 38 years is sooooo far down the road. I'm hard-pressed to think that any Disney-owned corporation would do this to its members. But who really knows what DVC will be in nearly four decades. DVC will certainly see many management shifts during that period. It may be spun-off into an entity separate from Disney altogether. Or, perhaps Disney will be purchased by Time Warner or Dell Computers or the San Diego Zoo.

 

[BWVDee]

Although the price of the DVC resorts will decrease at some point, I doubt it will ever decrease to the lows that other timeshare properties do soley because the location of the majority of the DVC resorts are on property at WDW! As long as WDW remains the top family vacation destination in the world, DVC will continue to retain value.

 

[rocketriter]

Originally posted by BWVDee
Although the price of the DVC resorts will decrease at some point, I doubt it will ever decrease to the lows that other timeshare properties do soley because the location of the majority of the DVC resorts are on property at WDW! As long as WDW remains the top family vacation destination in the world, DVC will continue to retain value.

Yes, particularly since Disney isn't going to want people to be able to buy first-class on-the-grounds accomodations for a tiny fraction of the comparable cost of similar Disney hotel rooms.

 

[Tagrel]

Originally posted by WebmasterDoc
I agree with tjkraz that Disney's incentive is more related to a desire to minimize competition for their active sales than an opportunity to make $5-10 per point on a ROFR purchase and sale as an add-on.

So, you think Disney will purchase back points at a high price, that they CAN'T resell at going rates? If they resell these points cheaply, then they would be competing with their own 'full price' sales OR have to pay maintenance on them. I'm not saying they are doing it for huge profit - but I doubt they'll want to take a big loss doing it either.

Its a huge balancing act. Keep the resale prices balanced with current sales. By adding 12 years to the SSR contract, Disney has shown that it KNOWS it needs added value on the new properties to keep them selling at a higher price. But with that, the resale price of the other resorts will have to start to decline. I can see them holding steady for a few years, and start a slow decline as 2042 approaches. I CAN'T see them rising along with Disney pricing of currently selling DVC resorts.

Have to wonder what Disney's long term plans are to stop resales from undermining new sales without having to buy up the resorts themselves? And I wonder how long the original plans thought they would be able to sell DVC units without saturating the market? They NEED to keep resale prices stable while they continue to sell new DVC properties, but how? Adding 12 years to all existing contracts would do it! But I'm not holding my breath on THAT happening!