Where do you think DVC resale prices are headed?

[Ruttangel]

I'd suggest if you're taking any money from savings OR if you're spending money that you would have otherwise put into savings OR if you're financing, that you shouldn't straightline the "burnout" of the contract buy in.

If you want to discount the out years to account for opportunity cost / cost of capital / time value of money, the number of years you would divide the buy in by would be (1-(r^n))/(1-r) where r is the savings rate AFTER inflation (so if your retirement savings is earning 8% it should be about 6%) and n is the number of years left. While this makes all of the numbers "worse" in terms of payback, it improves the standing of the 2042 resorts vis-a-vis the other resorts considerably.

If one is financing the math is more complicated, and worse.

I appreciate all that, this was just looking at 2020 costs. I have a AKL contract which is a much easier payback Calc. Just trying to keep it simple for new bidders out there to compare or maybe I’m justifying the impulsive purchase to myself.

 

[Ruttangel]

I'd suggest if you're taking any money from savings OR if you're spending money that you would have otherwise put into savings OR if you're financing, that you shouldn't straightline the "burnout" of the contract buy in.

If you want to discount the out years to account for opportunity cost / cost of capital / time value of money, the number of years you would divide the buy in by would be (1-(r^n))/(1-r) where r is the savings rate AFTER inflation (so if your retirement savings is earning 8% it should be about 6%) and n is the number of years left. While this makes all of the numbers "worse" in terms of payback, it improves the standing of the 2042 resorts vis-a-vis the other resorts considerably.

If one is financing the math is more complicated, and worse.

Have you got a model in excel you can share?

 

[Brian Noble]

The decline in active listings seems to defy logic/economics...unless there are just more listings elsewhere. Massive job loss, closed/limited parks, no specific end in sight...what am I missing?

For starters:

It's been said repeatedly on these boards, but it's worth mentioning again - the real glut of DVC sales lagged behind the Great Recession by almost a year.

I think there are several other elements at play. For many of us, things are just much harder right now, and have been since about mid-March. We are all getting used to a new normal in our day-to-day lives, and there is significant stress in just getting through the day. In the big long list of things you might do, getting your DVC membership ready for sale is probably no where near the top of the list. Especially if you have school-aged kids you are probably spending much of your spare time wondering whether they should go back in person, if not how you will handle that, etc. etc. What to do with your DVC membership that you might or might not need is just not that important. It's easy to forget that here on DISboards, but we are not representative of even the typical DVC owner, let alone the typical WDW guest.

It also strikes me that people haven't fully wrapped their heads around just how long things will be "different". How long will it take for the vast majority of folks to again feel comfortable traveling in airplanes, and being in large crowds no matter what precautions are taken? Even if only a modest fraction of people take a few years to get there, that's going to have an impact on demand for and supply of all things WDW.

Finally, some of this will play out in how broad-based and persistent the economic contraction is likely to be. I saw yesterday that one of the airline industry groups just extended their prediction that traffic will return to 2019 levels in 2024 (from 2023). The immediate economic impact is focused on a few particular segments of the economy: restaurants, travel, etc. But, as that drags on, the people in those industries will be buying less and the impact will fan out. Families might try to get an extra year or two out of the car they can no longer afford to replace, etc. It will take a good while for all of that to recover.

 

[Brian Noble]

I'd suggest if you're taking any money from savings OR if you're spending money that you would have otherwise put into savings OR if you're financing, that you shouldn't straightline the "burnout" of the contract buy in.

I agree with you, but have mostly given up trying to convince anyone else of it. I don't know why, but the time-value of money is just something many folks either can't or won't consider. As an aside, timeshare salespeople take significant advantage of that fact.

 

[CastAStone]

Have you got a model in excel you can share?

Lets see if this works, I've never tried sharing a Google Sheet before:

https://docs.google.com/spreadsheets/d/1D2dVGu7F606OIkvoVfT87nuSbiQJERzqkH8_q5nFt08/edit?usp=sharing
To edit it you will need to click Make a Copy in the File menu.

 

[bookwormde]

The decline in active listings seems to defy logic/economics...unless there are just more listings elsewhere. Massive job loss, closed/limited parks, no specific end in sight...what am I missing?

MY perception is that those who have 10k to 50K cash laying around to buy resale are likely those least impacted financially by Covid, with the exception of small business owners who may be severely impacted, so they are in a position to take advantage of any price pull back. While I do not have a way to quantify it, I think that DVD direct sales being totally shut down likely added to resale demand also since DVD would typically have been selling about 1000 contracts a month during that time

 

[Lorana]

I wonder that too. Not sure why anyone would want to pay once a year when they'll give you 12 months same as cash.

I wonder how much of it is instead that as long as it is 2020, the buyer will pay dues on any 2020 points you have. But once it's 2021 the buyer will pay dues on your 2021 points and your 2020 points become a free bonus.

I pay yearly because I want to put it on a credit card for cashback AND not worry about making the payment each month. Disney's auto-pay is only for direct debit; if it were credit card, I'd pay it monthly. But I "pay myself" each paycheck, by transferring next year's estimated MFs into a savings account, and then paying in a lump sum when they are due the next year (though I wait till February's final due date to pay them).

 

[lovethesun12]

I wonder that too. Not sure why anyone would want to pay once a year when they'll give you 12 months same as cash.

I wonder how much of it is instead that as long as it is 2020, the buyer will pay dues on any 2020 points you have. But once it's 2021 the buyer will pay dues on your 2021 points and your 2020 points become a free bonus.

This can work well for international owners. I have a visa with no foreign exchange fee, so if the exchange rate is favourable my plan is to use that to pay a lump sum. If the exchange rate is lower than usual, I have a USD account that I put money in for those scenarios, and I like to withdraw as little as possible from it, since I usually wait until the exchange fee is favourable before adding to it. Opting for payments in that case gives me more time to wait for the exchange rate to bounce back.

MY perception is that those who have 10k to 50K cash laying around to buy resale are likely those least impacted financially by Covid, with the exception of small business owners who may be severely impacted, so they are in a position to take advantage of any price pull back. While I do not have a way to quantify it, I think that DVD direct sales being totally shut down likely added to resale demand also since DVD would typically have been selling about 1000 contracts a month during that time

Also since people that want(ed) to buy DVC probably already visit regularly, it’s likely they were sitting on extra cash from cancelled vacations, and have the option to take advantage of better prices with no ROFR.

 

[Ruttangel]

Lets see if this works, I've never tried sharing a Google Sheet before:

https://docs.google.com/spreadsheets/d/1D2dVGu7F606OIkvoVfT87nuSbiQJERzqkH8_q5nFt08/edit?usp=sharing
To edit it you will need to click Make a Copy in the File menu.

1question DVC replaces vacation costs, so don’t you need to reduce the balance invested each year to account for that, say by $3,000pa

 

[CastAStone]

1question DVC replaces vacation costs, so don’t you need to reduce the balance invested each year to account for that, say by $3,000pa

You could drive yourself crazy trying to get that level of precision in place, but if you’ve discounted the out years appropriately you can get really really close by taking the Cash cost Of your vacation, divide it by the number of points you’re buying to replace that vacation, and comparing the result to the number you worked out.

I’d suggest using the price per point you can rent DVC points for (www.dvcrequest.com charges $19 for OKW and SSR, $20 for everything else, you can probably beat that if you rent privately) as your benchmark, as even when Disney has their deluxe villas for 35% off, renting is usually still cheaper.

 

[bookwormde]

7/30 update

number of newly posted resale contracts at about 240-260% of average*

* Aggregating site is not updating so lower level is directly observed, upper level includes what is would typically only observed through the aggregating site

 

[4luv2cdisney]

I agree with you, but have mostly given up trying to convince anyone else of it. I don't know why, but the time-value of money is just something many folks either can't or won't consider. As an aside, timeshare salespeople take significant advantage of that fact.

Many people don't consider it because they bought DVC instead of a larger trip to Europe or a new car, new deck, etc. I certainly didn't pull any $ out of other savings or investments for DVC. I used my normal vacation funds - regular, not invested, gonna blow it going somewhere (soon) no matter what, fun money!

I suppose I could run the time value of money calculation on everything I buy and feel really depressed all the time. Yikes! I have a budget and I don't worry about the money I spend that I didn't earmark for saving / investing as long as I am meeting my savings / investing goals.

Any $ you spend on anything non-essential COULD be invested. Do some people really figure out how much money they'd have if they didn't buy a new bedroom set and lived with their old one for 10 more years? Just curious.

 

[chunks]

Many people don't consider it because they bought DVC instead of a larger trip to Europe or a new car, new deck, etc. I certainly didn't pull any $ out of other savings or investments for DVC. I used my normal vacation funds - regular, not invested, gonna blow it going somewhere (soon) no matter what, fun money!

I suppose I could run the time value of money calculation on everything I buy and feel really depressed all the time. Yikes! I have a budget and I don't worry about the money I spend that I didn't earmark for saving / investing as long as I am meeting my savings / investing goals.

Any $ you spend on anything non-essential COULD be invested. Do some people really figure out how much money they'd have if they didn't buy a new bedroom set and lived with their old one for 10 more years? Just curious.

Depends on how expensive the bedroom set is . But in reality, I think he is using this because we are talking about 10s of thousands of dollars and a life span of 20+ years. The bedroom set is likely both cheaper and has a shorter lifespan.

 

[linzjane88]

Did anyone see the sweet price drop on Fidelity? $160 per point for a 160 point AKL listing

How 'bout NO!

 

[chunks]

Did anyone see the sweet price drop on Fidelity? $160 per point for a 160 point AKL listing

How 'bout NO!

I think that is a typo. I saw it yesterday morning and i think they messed up the posting based on the total price.

 

[linzjane88]

I think that is a typo. I saw it yesterday morning and i think they messed up the posting based on the total price.

Good catch- works out to be 118 a point. I would be a little cranky if my contract accidentally got listed for almost 50 bucks higher, lol!

 

[4luv2cdisney]

Depends on how expensive the bedroom set is . But in reality, I think he is using this because we are talking about 10s of thousands of dollars and a life span of 20+ years. The bedroom set is likely both cheaper and has a shorter lifespan.

My bedroom set is 26 years old (have replaced mattresses). Every time I have to repair a drawer or something, I say I'm going to buy a new set - but I just can't bring myself to spend the $$$!! However, I AM in the market for a DVC add-on.

I was playing catch up and only skimming the posts. I see now they were discussing if financing, taking from investments, etc. Which is understandable.

 

[Galun]

This is just anecdotal evidence / experience... We bought two contracts in March during the peak fear of corona virus, in the middle of the stock market crash.

We made multiple offers on additional contracts this week, at prices slightly higher than levels I paid in March. Every offer had been rejected.

 

[davidl81]

Many people don't consider it because they bought DVC instead of a larger trip to Europe or a new car, new deck, etc. I certainly didn't pull any $ out of other savings or investments for DVC. I used my normal vacation funds - regular, not invested, gonna blow it going somewhere (soon) no matter what, fun money!

I suppose I could run the time value of money calculation on everything I buy and feel really depressed all the time. Yikes! I have a budget and I don't worry about the money I spend that I didn't earmark for saving / investing as long as I am meeting my savings / investing goals.

Any $ you spend on anything non-essential COULD be invested. Do some people really figure out how much money they'd have if they didn't buy a new bedroom set and lived with their old one for 10 more years? Just curious.

Math wise DVC can be hard to "pay out" depending on many factors. What I see is how many people who really look at time value of money and are concerned about having it down to the exact penny were really paying cash rates for deluxe properties anyway? Honestly most people who are that analytical are going to have a hard time justifying the cost of a deluxe resort every year etc. The other factor that many of us owners find out after buying in is that the type of room you will stay at will change. Like many of us we bought in based on number of nights in a studio (we bought 160 at first). If we had only stayed in studios it's likely we would have never bought more points since the 160 I think gave us 10 days depending on time of year etc. Of course what happens is your family grows or you just mess up and rent a one bedroom or two bedroom because of availability and then it becomes tough to go back. I honestly think that is where DVC really gets us, it's not the first buy in, but the add ons from there as members start getting the bigger rooms.

The idea of buying versus renting is interesting, but you also have to account for the increase in rental cost over time. When I joined DVC (2008) $10 per point was the standard, now 12 years later it is $17-$19. What will it be in another 12 years ($28-32 based on that growth rate)? We think those prices are crazy right now, but 12 years ago you would have thought $19 per point to rent was insane.

 

[Galun]

The idea of buying versus renting is interesting, but you also have to account for the increase in rental cost over time. When I joined DVC (2008) $10 per point was the standard, now 12 years later it is $17-$19. What will it be in another 12 years ($28-32 based on that growth rate)? We think those prices are crazy right now, but 12 years ago you would have thought $19 per point to rent was insane.

There is also the option of buying at least one contract to be a DVC owner, and then having points transferred in when your travel plans call for more points. One does not need to pay the high purchase price of VGC to get points every year, because most don't visit / stay on site at Disneyland every year. Buy a contract at SSR (which in my opinion is currently the best balance among initial purchase cost, annual maintenance fee, and contract expiration), watch for and transfer in VGC points at a premium price, and you have full 11 month availability based on those points. But you need the first DVC contract to be able to do that.