Why are prices going up?

[mla973]

As a former DVC owner, I have been watching prices ever so often, as I am interested in re-purchasing when the time is right for our family.

In approx. 2005, we purchased a small BWV contract via resale for $84/pt. After two years, we sold it for $84/pt. We were very happy that we were able to use it, and minus the closing costs, didn't really lose any money.

I am just glancing at the resale market prices... some BWV contracts are listed at $90 and $91 per point. Not loaded contracts, just ones where the points are available at the next use year timeframe.

Now, considering that it's been 6 years since we sold for $84/pt (and that small contracts tend to sell for more per point than larger contracts), these prices seem crazy! I guess they are priced at what people are willing to pay, but it's becoming very difficult for me to think DVC is for us when a contract with 6 less years remaining, costs more money than is has in years past.

Is the inventory just that much less that demand is bumping up the prices?

Then, there is Vero Beach at $42/pt. ???

I know there are a lot of factors and what makes sense for some families does not work for others... it just seems like prices have really gone up but the length of the contract, and arguably some of the perks of being a DVC member, have gone down.

Just trying to make some sense of it all.

 

[DannysMom]

It is very simple, prices are market driven. Right now, there is not a lot of inventory, so it is a seller's market, and they will charge all that the market will bear.

The seller's may be asking in the $90/pt range, that doesn't mean they will get it! I think actual prices may be are right about what you bought & sold for in the past, which if you account for inflation, the value has dropped a little.

Now if you were in a position to purchase again a year to 18 months ago, it was more a buyer's market, with deals to be had if you were patient. By and large, the market drives the prices.

Sent from my iPad using DISBoards App, please excuse any typos or autocorrects!

 

[DrewJB]

I think the biggest thing increasing prices is price bumps on direct buys from Disney. Disney pushes the value of the resales up every time they increase their own prices. Some people that might have bought at direct prices a couple years ago could no longer afford to buy direct and get pushed to the resale market.

Disney very much controls the price of resale through a mix of both ROFR purchasing and their own increases in the price of direct points.

The only thing that could push prices down that is outside of the control of Disney is a crash in the economy. Because it is Disney there will always be interest in ownership - and every time Disney pushes up their prices, up go the resale values as well. I don't think you will see plummeting prices until some of the contracts have less than 20 years on them. Right now the expirations are so far out people tend to not really think about that.

 

[Mickbee]

I had a similar observation as you regarding the pricing increases... I was shocked to see how high the current pricing direct through DVC is today...

IMHO, the resale prices for a particular resort (i.e. BWV) are fairly wide spread up to $10 pp swing based on the contract. Some contracts have no current year points where other have a full load of banked and current year points. the devil is in the detail of the pricing... Also some contracts are sleepers as the seller may pay the current year dues yet points remain in the current UY. The BLT contracts are tight in the pricing but the points/dues available needs the attention.

I've looked at a few that appeared to be a semi-value, but they were stripped until 2015 with a late use year. To normalize the contract we would have needed to wait over two years. Granted the points could be borrowed but the contract would always be "in the red".

Thinking through the $84 six years ago vs $92 today... to me it doesn't really seem to be that large of an increase compared to the price to stay at WDW through a cash rental. The DVD point rental average has crept up as well.

No real science just a few random thoughts how I've viewed the increases over the years.

We originally purchase BCV at the pre-construction price of $70pp... Wish we hadn't sold those

 

[sonofanarchy]

I don't want to get into the whole is it right or wrong debate, but over the past few weeks I've spoke with about 5 owners of DVC and a couple of resellers, and they all said the same thing - They can't imagine why anyone would buy DVC directly through Disney at this point. Actually, spoke to 2 owners who have been members since 1998, and both interestingly told me that 2006 was the last year it made any sense to buy direct. Both had reasons, but I found the discussion very interesting and educational.

 

[ssawka]

I don't want to get into the whole is it right or wrong debate, but over the past few weeks I've spoke with about 5 owners of DVC and a couple of resellers, and they all said the same thing - They can't imagine why anyone would buy DVC directly through Disney at this point. Actually, spoke to 2 owners who have been members since 1998, and both interestingly told me that 2006 was the last year it made any sense to buy direct. Both had reasons, but I found the discussion very interesting and educational.

I agree that buying direct at this point is crazy! But, I would argue that buying direct made sense for us in 2009. When we started looking BLT had just come on the market and it was the resort that we wanted. Since BLT had not opened yet, there were no resales available. Also, the difference in price between BLT and other resale properties was less than $20 pp. Add to that the fact that BLT had 50 years of use on it, it made sense to us to pay the extra for BLT. We bought in June of 2009 for $92 pp. In one year the price went up 20%.

As for the OPs original question, why shouldn't prices go up? What prices have not gone up over the past few years? Inflation has been fairly steady over the last several years so it would only make sense that the price of DVC would have gone up as well. Are you paying the same amount for food as you did 6 years ago? Also, how much has the price of a hotel stay gone up in the last 6 years?

 

[disneynutz]

The economy and Disney affects the market. Disney was buying up contracts for awhile and now they have raised direct price several times and started a waiting list for buying the older resorts. They also placed booking restrictions on resale contracts, all this in an attempt to drive buyers into buying direct to the new resorts.

What has happened is that people rushed to buy resale before the restrictions went into force and the price increases has caused many to buy resale. The wait list from Disney also caused more to buy resale because often it's quicker to but resale at a lower price than to buy an older resort from Disney.

Bill

 

[Sandisw]

What you see now is, IMO, a bump in part to demand and some ROFR activity this past spring that allowed for some "jump" in resale prices and make it a seller's market.

I bought BWV in 2011 for $55/pt. When I started looking in 2009 to buy in--I ended up direct with BLT--BWV was running in the high 70's to low 80's but within a 2 year span, it dropped.

Now, its back up. Disney has raised the price on direct purchases but also allowed people to get on "wait lists" for the older resorts before increases prices in the spring on those resorts.

When someone is looking for a specific resort and UY and a smaller amount of points, it made sense to try to get it through Disney. For those that were looking to buy more, it caused them to jump quickly on what was available and raise asking price to get it by Disney.

SSR, since I started looking, as stayed pretty constant--in the $50 - $60/pt range. What as dropped the most seems to be AKV, although this seems to be on the rise a bit recently.

 

[Sandisw]

I agree that buying direct at this point is crazy! But, I would argue that buying direct made sense for us in 2009. When we started looking BLT had just come on the market and it was the resort that we wanted. Since BLT had not opened yet, there were no resales available. Also, the difference in price between BLT and other resale properties was less than $20 pp. Add to that the fact that BLT had 50 years of use on it, it made sense to us to pay the extra for BLT. We bought in June of 2009 for $92 pp. In one year the price went up 20%.

As for the OPs original question, why shouldn't prices go up? What prices have not gone up over the past few years? Inflation has been fairly steady over the last several years so it would only make sense that the price of DVC would have gone up as well. Are you paying the same amount for food as you did 6 years ago? Also, how much has the price of a hotel stay gone up in the last 6 years?[/QUOTE]

Timeshares in general are not something that typically gains value and IMO, its a bit risky to expect it, even with DVC. Yes, DVC has a great track record and seems to have a stable resale value--better than many. But, its not a product that one should go into expecting to get more than they paid if/when deciding to sell.

And, the prices today, are not reflective of what they were just 6 - 8months ago--as I already mentioned, I paid only $55 for BWV just two years ago.

 

[ssawka]

I agree that buying direct at this point is crazy! But, I would argue that buying direct made sense for us in 2009. When we started looking BLT had just come on the market and it was the resort that we wanted. Since BLT had not opened yet, there were no resales available. Also, the difference in price between BLT and other resale properties was less than $20 pp. Add to that the fact that BLT had 50 years of use on it, it made sense to us to pay the extra for BLT. We bought in June of 2009 for $92 pp. In one year the price went up 20%.

As for the OPs original question, why shouldn't prices go up? What prices have not gone up over the past few years? Inflation has been fairly steady over the last several years so it would only make sense that the price of DVC would have gone up as well. Are you paying the same amount for food as you did 6 years ago? Also, how much has the price of a hotel stay gone up in the last 6 years?

Timeshares in general are not something that typically gains value and IMO, its a bit risky to expect it, even with DVC. Yes, DVC has a great track record and seems to have a stable resale value--better than many. But, its not a product that one should go into expecting to get more than they paid if/when deciding to sell.

And, the prices today, are not reflective of what they were just 6 - 8months ago--as I already mentioned, I paid only $55 for BWV just two years ago.

Agreed, but DVC is not your typical timeshare. Many timeshares have a hard time selling direct when the properties age, but DVC has doubled in price over the past 4 years. It is true that you should not go into the purchase expecting the value to go up, but it does not shock me at all that resale prices have gone up given the huge increase in direct pricing.

 

[ELMC]

Quite frankly, I believe that this is a bubble. Now...don't go and make any purchasing or selling decisions based on this, but I don't think that these prices are sustainable. If you compare the long term cost of a stripped BWV contract in the 90s vs. some of the other options out there (specifically renting points), it is quickly approaching the point where the value has been priced out of the contract. Of course, there will always be those who compare to rack rates, and in that situation the value will still be there.

That being said, DVC is an emotionally charged purchase, and I'm not sure how much the numbers actually matter to many who have decided that this is something they want to own.

 

[tjkraz]

Quite frankly, I believe that this is a bubble. Now...don't go and make any purchasing or selling decisions based on this, but I don't think that these prices are sustainable.

I don't think I would call it a "bubble" but if the 2008/2009 recession taught us anything, it's that timeshare prices are VERY succeptible to the state of the economy. Even DVC.

Given the current direct selling prices, availability of resale contracts, demand for resale contracts and value that can still be gleaned from a contract with 30 years remaining, there's nothing inherently wrong with today's resale prices.

But when those conditions change, prices are gonna drop. Quickly.

There WILL be another hiccup in the economy. Could be driven by something that's foreshadowed like the housing crisis or more unexpected like a terror attack. Could be 10 years away...5 years...2 years. But it will happen.

And when the economy struggles again, the DVC resale market is gonna be ugly. Especially for those 2042 resorts which will have little hope for recovery and low demand among buyers.

 

[DizBub]

And when the economy struggles again, the DVC resale market is gonna be ugly. Especially for those 2042 resorts which will have little hope for recovery and low demand among buyers.

Just curious. How does this effect those of us who own one of these properties if we fully intend to use it until the end?

I can understand if one NEEDS to sell but otherwise do we lose value if we keep it and use it?

 

[tjkraz]

Just curious. How does this effect those of us who own one of these properties if we fully intend to use it until the end?

I can understand if one NEEDS to sell but otherwise do we lose value if we keep it and use it?

For the most part if you keep the points until contract expiration, you won't be impacted by any market fluctuations.

I own a 3 resorts and have never sold a contract. When prices fell in 2008/09, I didn't lose anything. And as prices climb today, I'm not gaining anything. These are strictly "paper" gains and losses...similar to stock prices rising and falling.

The only value-related certainty is that the points will be worth NOTHING when the contact expires.

That said, one way in which owners could be impacted in the long run is if the rate of defaults rises dramatically. Owners of a resort must collectively pay for maintenance and upkeep on the property. But if there are fewer owners, the burden increases for those who remain.

Imagine that in 2040, 25% of OKW owners have defaulted (failed to pay loans or dues.) The remaining 75% would have to pay to maintain the resort. That could drive up their dues higher than expected. Some of the costs are variable--25% of the rooms technically no longer need to be maintained or cleaned, there are fewer check-ins for the front desk staff to handle, fewer bus passengers, etc. But the fixed costs like pool operations, security, landscaping, taxes and others still have to be paid regardless of the number of owners.

It's a problem which other timeshares are dealing with today. An undesirable resort in an undesirable location is not a good combination. Lobbying groups are even pushing for legislation to block owners from walking away from timeshares. Since most timeshares have perpetual ownership, this even impacts the heirs of a buyers--the children or siblings of a deceased TS owner are stuck paying for a property they never wanted.

Disney's ability to re-sell older contracts and even rent the rooms to non-owners at nightly rates mitigates this risk. DVC still has means to rid itself of points left behind via default.

 

[mla973]

As for the OPs original question, why shouldn't prices go up? What prices have not gone up over the past few years? Inflation has been fairly steady over the last several years so it would only make sense that the price of DVC would have gone up as well. Are you paying the same amount for food as you did 6 years ago? Also, how much has the price of a hotel stay gone up in the last 6 years?

While I agree with this (in theory), I think there are somethings that make DVC different, as mentioned by other posters.

While the DVC resale market prices have gone up, the "value" - in terms of length of contract - has gone down. So, one is paying more for a contract, but receiving less in terms of years remaining.

I have been monitoring prices for the last few years, and it just blew me away to see $90/pt for BWV. Given the rental prices for points, purchasing at these prices won't be an option for us right now because the other perks aren't worth this cost.

 

[dmunsil]

That said, one way in which owners could be impacted in the long run is if the rate of defaults rises dramatically.

Correct me if I'm wrong, but doesn't foreclosed inventory belong to DVD, who then has to pay the dues on it? So if 25% of the inventory goes back to DVD and they haven't sold it to new owners yet, don't they owe 25% of the maintenance cost?

Is there some way out of it where they can foist the costs on the existing members? Perhaps by not foreclosing, just letting the past-due fees pile up?

If someone is not paying their dues, but has not yet been foreclosed on, I wonder who picks up those costs?

 

[sonofanarchy]

While I agree with this (in theory), I think there are somethings that make DVC different, as mentioned by other posters.

While the DVC resale market prices have gone up, the "value" - in terms of length of contract - has gone down. So, one is paying more for a contract, but receiving less in terms of years remaining.

I have been monitoring prices for the last few years, and it just blew me away to see $90/pt for BWV. Given the rental prices for points, purchasing at these prices won't be an option for us right now because the other perks aren't worth this cost.

On the flip side, renting points (in many cases) is going to become antiquated soon. 3 Years ago, it was normal to pay $10 per point. Now, if you're very lucky, you'll pay $12, and in most cases, $14. It's gotten to a point where you're better off booking a DVC Villa then adding the discount when it comes out, which it does 90% of the time.

I'm no expert on DVC (though I have done a great deal of research), but I honestly think as big as it's been for Disney, they've gotten a bit carried away with pricing and the whole thing is going to run into a brick wall at some point.

 

[MoreTravels]

I'm no expert on DVC (though I have done a great deal of research), but I honestly think as big as it's been for Disney, they've gotten a bit carried away with pricing and the whole thing is going to run into a brick wall at some point.

I don't think so.

Disney has no real competitor.... who? Universal Studio? Their facilities and characters are kindergartenish when compared to Disney.

Disney can get away charging $100 per day for admission price. It can also charge $750 per night for its deluxe resorts. And its stock has DOUBLED in the last 2 years, from $30's to $60's.

Until there is a real competitor with similar Mickey character, these parents have no choice... they have to come to Disney sooner or later.

 

[Apps]

I don't think so.

Disney has no real competitor.... who? Universal Studio? Their facilities and characters are kindergartenish when compared to Disney.

Disney can get away charging $100 per day for admission price. It can also charge $750 per night for its deluxe resorts. And its stock has DOUBLED in the last 2 years, from $30's to $60's.

Until there is a real competitor with similar Mickey character, these parents have no choice... they have to come to Disney sooner or later.

Also, they just bought Star Wars and own Marvel comics. They have so many branding opportunities in the future that they may become even more popular. I can't wait for Star Wars land

 

[sonofanarchy]

I don't think so.

Disney has no real competitor.... who? Universal Studio? Their facilities and characters are kindergartenish when compared to Disney.

Disney can get away charging $100 per day for admission price. It can also charge $750 per night for its deluxe resorts. And its stock has DOUBLED in the last 2 years, from $30's to $60's.

Until there is a real competitor with similar Mickey character, these parents have no choice... they have to come to Disney sooner or later.

Yes, right now, they are getting away with charging $100 for daily admission, but let's be serious - Who buys a 1 day ticket?

Universal is very much competing with Disney. IOA may surpass both Hollywood Studios and Animal Kingdom in attendance this year. I'd call that competition.

I don't know too many people who would pay $750 a night for a hotel room. Sure, there are some that do, but most, even when staying at the most expensive resorts, are doing so with some sort of discount.

The issue DVC is going to have is that after the Polynesian, that's it. No more Deluxe Resorts to add on to. No more room near Magic Kingdom or Epcot. A standalone DVC unit at the prices they're asking today at a less desirable locale on property won't work.

WDW is going nowhere. It'll always be around. DVC however, is going to reach a limit. And that's OK. They'll have made their money and owners will have their vacations. The only thing I'd question is how well will Disney maintain the DVC properties once they stop selling?