Where do you think DVC resale prices are headed?

[TraderSamWDW]

Underlying economic issues are not the reason we are having these problems. We are having these problems because a public health issue has shut down so much commerce. There are not 100’s of millions of bad loans that have to be worked through like in 2008.

Exactly. The the economic issues are not 'underlying' but result of this. We may have been headed for a mild recession, the economy is cyclical after all.
But we were not headed for this.

 

[Lorana]

e the economic issues are not 'underlying' but result of this.

I think there are underlying economic problems that will come to light as a result of this, which will have longer impacts on our economy. After all, all the recent tax cuts have drastically undermined our economic security and we don’t have the cash flow coming in. Where is the money for all these bailouts going to come from? What happens if the government cannot increase its debt, or in crisis our debt-holders demand our debt be paid? I’m certainly not thinking we will get that dire, but it is a possibility, and while the current situation is a health crisis, the economic problems that were already brewing will exacerbate the situation.

 

[Brianstl]

I think there are underlying economic problems that will come to light as a result of this, which will have longer impacts on our economy. After all, all the recent tax cuts have drastically undermined our economic security and we don’t have the cash flow coming in. Where is the money for all these bailouts going to come from? What happens if the government cannot increase its debt, or in crisis our debt-holders demand our debt be paid? I’m certainly not thinking we will get that dire, but it is a possibility, and while the current situation is a health crisis, the economic problems that were already brewing will exacerbate the situation.

Taxes collected by the Federal government were up after the tax cut.

 

[Cyberc1978]

If we end up in a depression the impact to resale prices will be huge. If we only have a short recession then the impact will be smaller however while we are there some might still need the cash fast so they dump their contracts.

 

[RanDIZ]

With everything going down the drain, how soon will Disney raise the ticket prices?

Disney is now seeing what it’s like to have “0” revenue coming from parks. People are seeing “0” or little income coming in. If Disney even thought of raising prices, they’d be further pushing themselves into debt. Disney vacations are not cheap to begin with. It will be a while before people get back on their feet. Consumers have power in numbers and for sure will make a stand and not go to parks if that’s the case. Let’s stand together!

 

[Lorana]

Taxes collected by the Federal government were up after the tax cut.

The data does not seem to support that:
https://www.brookings.edu/policy202...cut-the-tax-cuts-and-jobs-act-pay-for-itself/
The CBO predicts a deficit of $1.1 Trillion in 2020, with $17.8 trillion in debt held by the public. Who knows what those numbers will look like in a few months time with the bailouts.
https://www.cbo.gov/topics/budget
Some more info on deficit and debt drivers, which cites tax cuts: https://www.thebalance.com/current-u-s-federal-budget-deficit-3305783

I am not, by any means, an economist and like most of you, I’m concerned about what the future may hold for our well-being - both health and economic. But there have been numerous factors before the pandemic indicating potential long term problems with how our economy operates and the pandemic is likely to make those come to the forefront of this continues for a long time.

 

[Starport Seven-Five]

I’m one of those that had no interest in DVC at previous prices but may spend some cash on it if prices drop enough. There is definitely a floor in the market where people like me will take a risk. We typically stay at values or offsite but if AKL is an option at $100/night... I’m in.

we didn't NEED GM. There were other car manufacturers., you would have had no issue getting a car. And GM (and the banks) did it to themselves. the bailouts of 2008 were all to companies that did it to themselves. That's not really the case here. Guess we need the banks
We do not NEED GM.

If GM would have gone under, the entire automotive supply base would have followed. This would have had a cascading affect as all of the other automakers use the same supply base and suddenly had part shortages.

Bailing out GM (primarily through loans) was necessary if you want a US auto industry coming out of the recession. Textbook definition of too big to fail.

 

[Deploraboo]

There are bad loans. Securitized consumer and aircraft loans, Cov lite loans, junk corporate debt, revolvers with zero protections. We just didn’t know how bad they were until now.

 

[sethschroeder]

Has anyone thought of selling any of their contracts now and then likely re-buying in 6-12 months?

Wondering what people's thoughts are. I doubt I would do it but I like thinking through theoretical questions like this.

What are the costs associated with selling DVC? You have ROFR fee, estoppel fee, and commission (8.5% with the board sponsor it looks like).

Is anyone planning on this?

 

[MICKIMINI]

Has anyone thought of selling any of their contracts now and then likely re-buying in 6-12 months?

Wondering what people's thoughts are. I doubt I would do it but I like thinking through theoretical questions like this.

What are the costs associated with selling DVC? You have ROFR fee, estoppel fee, and commission (8.5% with the board sponsor it looks like).

Is anyone planning on this?

Selling is pretty much 8.5% right now in commission and no, I would not sell right now. The points we own are not restricted points (we can use at RR).

I sold two contracts last year that I held for 1 year and made a nice profit. I used that profit to buy 2 more loaded (triple points) contracts, rented and offset the purchase price. Leveraging profit "has" been an option IMHO but now for me anyway, it is hold onto what I have and buy more. I think it will be fall before there are good deals.

 

[Sandisw]

Has anyone thought of selling any of their contracts now and then likely re-buying in 6-12 months?

Wondering what people's thoughts are. I doubt I would do it but I like thinking through theoretical questions like this.

What are the costs associated with selling DVC? You have ROFR fee, estoppel fee, and commission (8.5% with the board sponsor it looks like).

Is anyone planning on this?

I have BWV up for sale,.,it’s been up about a month, Accepted an offer 10 days ago, but buyer backed out today.

My fees are $150 for estoppel and the 8.5% commission because I am with the TSS.

The plan...before this all happened...was to buy BLT to replace it, Now, we are trying to decide if we want to change up plans.

 

[Grumpy by Birth]

We typically stay at values or offsite but if AKL is an option at $100/night... I’m in.

It's important to remember that MFs represent the vast majority of the "cost" of DVC and those MFs have no relation to your buy-in price-per-point.

Obviously, getting a better price for your initial outlay saves some more $, but consider this:

Let's say you don't care about Savannah View and don't plan to travel in Magic or Premiere season. In that case you could probably get by with 100 points for a week-long stay per year.

MFs are currently $7.67 for AKV (that will continue to rise over the years, but I'll use that figure for now). If you purchase 100 points at current resale prices (I'm going to arbitrarily use $110 per point, which is perhaps even a bit on the high end right now), initial cost would be $11,000 plus let's add $500 closing cost... so call it $11,500.

Oversimplifying things slightly, but you'll be getting enough points to stay 7 nights/year for the next 36 years or 252 nights. Dividing out your initial cost by 252 nights comes to around $45/night.

But you also have to figure in the annual MFs. 100 points x $7.67 = $767 per year. So for those 7 nights each year, the MFs add another $109 and change per night.

So, even if the cost of resale contracts goes to ZERO, the average cost per night won't really be $100 or less.

At current resale prices, the cost per night in my example is in the neighborhood of $150. Not bad in my opinion for Animal Kingdom.

My point is: if prices for resale contracts drop in half, you would save about $20-25 more per night off of an already decent rate. Even if you got the contract for free, you'd only be saving about $45/night because the majority of your total cost comes from MFs.

Bottom line: lower resale contract prices will save you money, but because MFs are not tied to the contract cost and will only continue to rise (and as I said, represent the majority of your total cost), those savings are not substantial if you're looking at it from a cost per night perspective.

 

[Starport Seven-Five]

It's important to remember that MFs represent the vast majority of the "cost" of DVC and those MFs have no relation to your buy-in price-per-point.

Obviously, getting a better price for your initial outlay saves some more $, but consider this:

Let's say you don't care about Savannah View and don't plan to travel in Magic or Premiere season. In that case you could probably get by with 100 points for a week-long stay per year.

MFs are currently $7.67 for AKV (that will continue to rise over the years, but I'll use that figure for now). If you purchase 100 points at current resale prices (I'm going to arbitrarily use $110 per point, which is perhaps even a bit on the high end right now), initial cost would be $11,000 plus let's add $500 closing cost... so call it $11,500.

Oversimplifying things slightly, but you'll be getting enough points to stay 7 nights/year for the next 36 years or 252 nights. Dividing out your initial cost by 252 nights comes to around $45/night.

But you also have to figure in the annual MFs. 100 points x $7.67 = $767 per year. So for those 7 nights each year, the MFs add another $109 and change per night.

So, even if the cost of resale contracts goes to ZERO, the average cost per night won't really be $100 or less.

At current resale prices, the cost per night in my example is in the neighborhood of $150. Not bad in my opinion for Animal Kingdom.

My point is: if prices for resale contracts drop in half, you would save about $20-25 more per night off of an already decent rate. Even if you got the contract for free, you'd only be saving about $45/night because the majority of your total cost comes from MFs.

Bottom line: lower resale contract prices will save you money, but because MFs are not tied to the contract cost and will only continue to rise (and as I said, represent the majority of your total cost), those savings are not substantial if you're looking at it from a cost per night perspective.

I was looking at value rooms to get that $100/night figure which is 72 points for the same week a standard view is 100 points.

(72*7.67)/7=$78.89
(60*72)/(7*36)=$17.14
Total=$96.03

I know that's optimistic in both value rooms being limited and a $60 pp price but just where my mind was at. Your point regarding MFs is well taken as that is the primary cost when looking at these.

 

[Deploraboo]

Need to take into account price disruptions in rooms moving forward. If economic downturn is prolonged or we enter the “d” word, even DIS isn’t immune to price reductions.

 

[ELMC]

Has anyone thought of selling any of their contracts now and then likely re-buying in 6-12 months?

Wondering what people's thoughts are. I doubt I would do it but I like thinking through theoretical questions like this.

What are the costs associated with selling DVC? You have ROFR fee, estoppel fee, and commission (8.5% with the board sponsor it looks like).

Is anyone planning on this?

It's a good thought exercise for sure. I thought about it as well but ultimately decided not to. The primary reason is that my resale contracts are grandfathered, so I technically couldn't buy the same thing back. My head started to hurt when trying to assign a value to the blue card, so I stopped thinking about it.

Really, though, I think the prices have already dipped a bit which is going to eat into the profit margin, and the calculation is based on what I think contracts will sell for in 6-12 months. If I'm wrong and they don't drop as much as I thought, then I've done a whole lot of work for not a lot of money. That said...coming into this year I downsized my DVC "portfolio" by about 60%. It was for no particular reason at the time other than the fact that I thought the product was way overpriced and I didn't feel comfortable holding that many points. In my mind I wasn't valuing the contracts as what I paid for them but instead what I could get for them. When looking at it like that, the obvious course of action (for me) was to sell. I don't think it's as clear cut right now.

 

[Grumpy by Birth]

I was looking at value rooms to get that $100/night figure which is 72 points for the same week a standard view is 100 points.

(72*7.67)/7=$78.89
(60*72)/(7*36)=$17.14
Total=$96.03

I know that's optimistic in both value rooms being limited and a $60 pp price but just where my mind was at. Your point regarding MFs is well taken as that is the primary cost when looking at these.

Very optimistic to count on Value Studios. But assuming they were readily available, here's the math for $110/point:

(72*7.67)/7=$78.89
(110*72)/(7*36)=$31.43
Total=$110.32

You didn't add closing cost to your example, so I left them off this time for an apples to apples comparison.

So, for Value Studios, we are already pretty close to your target cost/night with $110/point which, as I mentioned, I consider to be the high end of current prices.

By all means, hold out for lower prices, but even if the price drops to $60/point, you're only looking at about $15/night savings (which admittedly adds up over the life of the contract... $15 x 252 nights = $3780).

I'm just saying that current resale prices are already fairly close to $100/night.

 

[CLE2WDW]

Why would anyone in their right mind right now purchase a fractional ownership interest in a resort that is indefinitely closed?

People were asking to same questions regarding stocks of banks in 2008... now those people returned 10x on their investment by being prudent while others were fearful. Believe it or not Disney will reopen one day and DVC costs will go back to record highs again. You can’t keep the US consumer down for long.

 

[CLE2WDW]

There aren’t underlying economic issues? Sorry but the stock market is down 30+ %, UE claims this week or next will dwarf all previous weekly records, GDP estimated to go to Great Depression levels, Hotel, Tourism and Aircraft and Airlines are heading toward BK, municipal debt facing defaults due to lack of revenue, 10 year Treasury had lowest rate ever recorded, I could go on and on here...

Boy you should write for CNN with all that negativity. Where to begin....
1) yes, equity markets are down 30%+ from their all time highs. Remember the markets are always forward looking so the high unemployment and historic quarterly losses/GDP loss are already being priced in. Also, quarterly GDP will be low but won’t reach depression levels.
2) there is a federal bailout coming much like we saw in 2008 with financial institutions.
3) the Fed has already stated they will provide liquidity in the muni markets. Non issue
4) the 10 year treasury at 1% is one of the best ingredients we have in the water right now. This will allow for the recovery to be more “V” shaped. When the risk free rate is low risk on assets tend to outperform over a long period.

On top of all this... let’s not forget that financial institutions are strong and very well capitalized.

The sky is not falling and this virus (just like every virus in the history of man) is temporary.

 

[RaymOOOnd]

There aren’t underlying economic issues? Sorry but the stock market is down 30+ %, UE claims this week or next will dwarf all previous weekly records, GDP estimated to go to Great Depression levels, Hotel, Tourism and Aircraft and Airlines are heading toward BK, municipal debt facing defaults due to lack of revenue, 10 year Treasury had lowest rate ever recorded, I could go on and on here...

These are just secondary effects of panic. The underlying economy going into the whole thing was fine.

 

[Grumpy by Birth]

Why would anyone in their right mind right now purchase a fractional ownership interest in a resort that is indefinitely closed?

People were asking to same questions regarding stocks of banks in 2008... now those people returned 10x on their investment by being prudent while others were fearful. Believe it or not Disney will reopen one day and DVC costs will go back to record highs again. You can’t keep the US consumer down for long.

Agreed. The immediate health threat will subside (maybe not quickly, but it will eventually). Disney will re-open. I don't anticipate having to sell and will go back to using my DVC points eventually to vacation at WDW.

We were already considering adding more points and, if prices drop significantly, that would make adding on more appealing. Given the odds against Disney never re-opening, I'm willing to "gamble" a few thousand for an add-on contract that I was already considering purchasing at double the price.

You might consider me not "in my right mind" to be considering this, but I'd wager that I'm not alone in being on the lookout for a bargain in the coming months.