So is it a bubble

[frank808]

For comparison sake of, “if only I had purchased way back when...” say you purchased Dvc back in 1994 at $62/point. That’s equivalent to purchase of $104 today adjusted for inflation. Old key west is available at this price on resale market today and so in that sense you get $ back and had 25 years of vacations at the cost of mf’s. Had you sold a couple years ago though the scenario would have been less favorable and adjusted for inflation, it was a loss. Now take the $62 in 1992 and put into investment instead of Dvc. That $62 is equivalent of $850 today. Still not the worst thing considering 25 years of vacation for cost of Mf’s but also not the best way to invest a chunk of cash. The 250 point contract was $15,500 purchase price in 1994. Had just that chunk of change been invested instead of paying upfront for Dvc it’s worth 212k today.

Finance of a purchase and no matter when you have purchased and at what price, it’s a big financial hit and risk. Dvc is for fun. It’s not an investment. Dvc clearly states that all over their website. Above just looks at the last 25 years. Purchased at direct prices today and the next ression I could see a worse outcome for Dvc compared to the last recession.

All this negative talk and I still wanted Dvc. My husband is a banker and VERY against timeshares, even Dvc. I ended up purchasing as I could with cash and by using $ I would have otherwise spent on more expensive vacations. Some resale and some direct. I get an intrinsic reward from the ownership and am happy with it but to each their own. I know it’s not the best use of money but Disney does it better than anyone when in comes to desire to part with my $.

If we take no vacations and instead invest the monies, we would all be better off financially. Can't always measure happiness via $$ you have all the time. Memories are priceless.

 

[Whositsgalore]

If we take no vacations and instead invest the monies, we would all be better off financially. Can't always measure happiness via $$ you have all the time. Memories are priceless.

Exactly! Someone said DVC isn’t saving you money, it’s costing you money. True! We are definitely spending money but for our family we are going to take trips, we don’t do traditional Christmas, birthdays etc...we take a trip. So for us (we live within 4 hours of WDW) Disney has always been a place to spend a weekend away or a week of vacation and so on. We will be spending the money somewhere so it might as well be a place close to home that we all agree is our favorite destination. If we pass ROFR we will spend the next few months paying off our contract and subsequently using our points for all vacations in 2019. By my calculations we have paid for our vacations, took vacations and now have the next 30+ years of some kind of vacation (a few weekends and at least 1 week) paid for. So no we may not be “saving” money but we are in no way spending more every year than we would have not buying DVC. Disclaimer: This is why it makes perfect financial sense for our family.

 

[Dean]

If we take no vacations and instead invest the monies, we would all be better off financially. Can't always measure happiness via $$ you have all the time. Memories are priceless.

Frank, that assumes you can afford to throw the money away. Unfortunately the stress of finances and it's effects are also long-lasting. DVC and any timeshare can be a blessing or a curse. But unless DVC actually saves one money over paying cash or provides additional value for any extra money paid, it's a poor choice. Just to pay extra to be a member of the club, with no added other benefit, would make no sense.

 

[James Chappas]

Is anybody buying DVC just to speculate and not actually stay - there’s a sign of a bubble

Also, interest rates are rising which means DVC will become more expensive for many

 

[DisneynBison]

Is anybody buying DVC just to speculate and not actually stay - there’s a sign of a bubble

Also, interest rates are rising which means DVC will become more expensive for many

There definitely is. I talked to one realtor that had a listing and they said the person buys loaded contracts rents off the points and sells some and keeps some for continued renting. Rinse Repeat. This would burst if the IRS ever looked into actually seeing if it was counted as income. I don't see that happening, and it will take a major downturn at the parks because of economy or a major terrorist incident or something like that that spooks people from vacationing.

As for global warming I have absolutely 0 zip nada concern with it and DVC. None in the least but if others want to worry about it by all means have at it.

 

[Ben E N]

There definitely is. I talked to one realtor that had a listing and they said the person buys loaded contracts rents off the points and sells some and keeps some for continued renting. Rinse Repeat. This would burst if the IRS ever looked into actually seeing if it was counted as income. I don't see that happening, and it will take a major downturn at the parks because of economy or a major terrorist incident or something like that that spooks people from vacationing.

As for global warming I have absolutely 0 zip nada concern with it and DVC. None in the least but if others want to worry about it by all means have at it.

Compared to the recently skyrocketing stock market, that's really not a smart investment plan considering they lose 8.5% with each sale. To each their own I guess though.

 

[Bing Showei]

In an open market, I would say it would be harder to point at a bubble as demand would naturally push prices up, but obviously, DVC does not sell on an open market.

DVD sets an artificial floor for the price of a resale contract. As long as DVD exercises ROFR, prices will be artificially propped up in the market, and brokers will say things like this:

Nick Cotton with DVC Resale Market (who I love and is awesome...shameless plug) called me and said that he would gladly submit the offer; however, based on the rate of buy back by Disney and my offer it will most likely be taken. He advised offering nothing south of $97 stretching only to $96 if I must.

That's not a natural progression of market determined pricing, it's the Magic (capital M) version of OPEC.

Using March UY SSR as an example (the only one I have evidence to support), even without the demand presently there (no waitlist), DVD continued buying back contracts, artificially inflating prices. It's not that the market, on its own, decided that SSR is worth $99/points, it's that people are now afraid to offer less for fear of losing the contract to the mouse.

Looking back at 2008-2011, foreclosures flooded the system, and we saw what happens when DVD throttles back the buyback process. The bottom falls out from under the market and those who couldn't afford to continue holding DVC lost their shirts or just walked away. Buyers who were in a strong financial position to put capital in, swooped in to buy contracts for dirt cheap and had the buy of a lifetime.

Absent ROFR, people would test the bottom (again, it happened during the last market down turn). Even in this current climate, people continue to test the bottom. As soon as indications are that the bottom has been pulled, prices will go down with it.

And for the Mouse to go this route, bigger economic trends are likely in play which would undoubtedly hit demand as concomitant factors like employment, housing prices, and personal net worths decline.

The intrinsic value of something should be determined by the market, but over the last quarter, with the change in the prices we are presently seeing, it's hard to see how this is a natural progression of prices (new fandangled attractions notwithstanding).

 

[DisneynBison]

Compared to the recently skyrocketing stock market, that's really not a smart investment plan considering they lose 8.5% with each sale. To each their own I guess though.

It can be done for less than 8.5%. In bulk everything is negotiable. Just about everything was a bad investment against stocks the last 18 months but diversification is also good long term and over the last 4 years there has been a nice chunk of money made off DVC by some.

 

[longboard55]

I am working hard to set up retirement and DVC is just the type of thing I am looking for, pay now and save when I am not getting a paycheck. 20 years ago with kids in the house finances were not there to buy, I think it has demographics on their side. I can not see any reason in the next 20 years to sell

 

[Dean]

I am working hard to set up retirement and DVC is just the type of thing I am looking for, pay now and save when I am not getting a paycheck. 20 years ago with kids in the house finances were not there to buy, I think it has demographics on their side. I can not see any reason in the next 20 years to sell

If you want to stay on site at WDW or DL then it could make sense, it doesn’t for other options. I wonder if something like Marriott (points or weeks), Bluegreen, Wyndham, Hilton or Worldmark would be better. They all would for non WDW/DL travel. Plus a timeshare has built it risk and long term costs that will cont to increase. Thus you’re only prepaying part of a your long term travel accommodation costs. And DVC will be the most expensive of those for most situations. In addition one needs to be able and willing to plan well in advance, depending on the system, 10-13 months out, and be OK withs the compromises of a timeshare.

We have set up our timeshare portfolio largely for how we'll use it in retirement.

 

[Katie L]

There definitely is. I talked to one realtor that had a listing and they said the person buys loaded contracts rents off the points and sells some and keeps some for continued renting. Rinse Repeat. This would burst if the IRS ever looked into actually seeing if it was counted as income. I don't see that happening, and it will take a major downturn at the parks because of economy or a major terrorist incident or something like that that spooks people from vacationing.

As for global warming I have absolutely 0 zip nada concern with it and DVC. None in the least but if others want to worry about it by all means have at it.

I was surprised my question took a turn to global warming, too. I thought the current terminology is climate change, too. I also have no concern on that - but found the topic interesting.

 

[Katie L]

In an open market, I would say it would be harder to point at a bubble as demand would naturally push prices up, but obviously, DVC does not sell on an open market.

DVD sets an artificial floor for the price of a resale contract. As long as DVD exercises ROFR, prices will be artificially propped up in the market, and brokers will say things like this:

That's not a natural progression of market determined pricing, it's the Magic (capital M) version of OPEC.

Using March UY SSR as an example (the only one I have evidence to support), even without the demand presently there (no waitlist), DVD continued buying back contracts, artificially inflating prices. It's not that the market, on its own, decided that SSR is worth $99/points, it's that people are now afraid to offer less for fear of losing the contract to the mouse.

Looking back at 2008-2011, foreclosures flooded the system, and we saw what happens when DVD throttles back the buyback process. The bottom falls out from under the market and those who couldn't afford to continue holding DVC lost their shirts or just walked away. Buyers who were in a strong financial position to put capital in, swooped in to buy contracts for dirt cheap and had the buy of a lifetime.

Absent ROFR, people would test the bottom (again, it happened during the last market down turn). Even in this current climate, people continue to test the bottom. As soon as indications are that the bottom has been pulled, prices will go down with it.

And for the Mouse to go this route, bigger economic trends are likely in play which would undoubtedly hit demand as concomitant factors like employment, housing prices, and personal net worths decline.

The intrinsic value of something should be determined by the market, but over the last quarter, with the change in the prices we are presently seeing, it's hard to see how this is a natural progression of prices (new fandangled attractions notwithstanding).

DVD had a sharp drop in sales in April - and it seems like they are buying up faster than ever here in May. You're right that DVD has so much control. Truly, an amazing business model with the ROFR and the captured demand and Disney-philes where prices is never concern, even willing to go in to debt. I wish I had half the business acumen of Walt.

 

[Ben E N]

DVD had a sharp drop in sales in April - and it seems like they are buying up faster than ever here in May. You're right that DVD has so much control. Truly, an amazing business model with the ROFR and the captured demand and Disney-philes where prices is never concern, even willing to go in to debt. I wish I had half the business acumen of Walt.

And yet their stock price has been stagnant for 2 years... I wish they had never bought ESPN

 

[jpeterson]

And yet their stock price has been stagnant for 2 years... I wish they had never bought ESPN

I have to imagine that so do they.

 

[ELMC]

we are considering buying in via re-sale- I’m looking at the price increase YoY of like 25% on older resorts and I’m just wondering opinions from you long-timers. Do you think we are in a bubble? A recession would bring the prices back down - anything else that you think would?

What I see on the horizon are just more reasons for value to increase - but sustained 25% yoy seems impossible.

Thoughts?

It's a tough call. Resale prices are at an all time high, but then again so are direct prices. The pattern for the past 5-6 years is that a glut of contracts would hit the market in January and that, combined with several other factors, would result in a bit of a price drop. Then prices would gradually increase over the course of the year until the same thing happened the next year. I actually sold a few contracts in November of 2017 to try to get out ahead of this pattern. Guess what? It didn't work. Prices continued to rise and I did not get as much for my contracts as I could have. My point is that much like the stock market, DVC resale price trends are difficult to predict. I would focus on some of the buying decisions that have been discussed in this thread along with whether or not you are getting a good price vis-a-vis other contracts in this market. If so, I would say to go for it and not worry. Prices can continue to rise just as easily as they can fall, that's out of your control. Good luck!