DVC and The Great Recession of 2007-2014

[emchen]

"Those who cannot remember the past are condemned to repeat it."

With talk of a looming recession, I began to search the forums for member experiences through that time, hoping to gain insight into how they handled it.

I wonder how many owners stuck through the housing crisis and subsequent recession ca. 2007? Did you sell, did you buy more, did you rent out your points? I bet there are stories to be told that many of us would love to hear and learn from.

I did a little background reading that taught me prior to 2007, DVC was comprised of Old Key West, Board Walk Villas, Beach Club Villas, and Villas at Wilderness Lodge, Vero Beach Villas, Hilton Head Island (2042 group). Interestingly, Animal Kingdom Lodge, Bay Lake Tower, Saratoga Springs Resort, Aulani, and Villas at Grand Californian (>2057 group) all were children of The Great Recession, all beginning sales within the first 3 years of the collapse.

The direct cost graph took no dip, probably because opening sale prices factored the recession in! It is arguable that resale prices took a hit, but that's where old-timers come in and tell us anecdotal info.

DVC members, if you bought in before or during the last recession, sold or re-bought through the collapse, please share with us your stories...

 

[Maistre Gracey]

Looming recession???

Oh my...

 

[Ben E N]

Looming recession???

Oh my...

There are indications that it may already be beginning. Could just be a blip as well, but we are coming off the longest recessionless period in quite a while.
Just because there is potentially a recession going on right now, or just around the corner, does not mean it has to be as severe as the one from 2008.

 

[Maistre Gracey]

There are indications that it may already be beginning. Could just be a blip as well, but we are coming off the longest recessionless period in quite a while.
Just because there is potentially a recession going on right now, or just around the corner, does not mean it has to be as severe as the one from 2008.

Okay. I don’t really agree, but that’s another thread. In fact, an entirely different board.

 

[Ben E N]

Okay. I don’t really agree, but that’s another thread. In fact, an entirely different board.

The question was placed in the right place here, though. (Perhaps would be better in the 'purchasing' strand)
It's asking that if this is in fact that start of a recession, not saying that it for sure is one, what should we as owners/ potential buyers expect to see happen? I personally am curious as well, and moves like flipping a Riviera contract from buying in at $180 to selling at $100, and Poly points listed for under $130 show that potential changes may already be beginning.

 

[igrsod]

I'm curious about this too. My DH and I were just talking about this last night. Would it be beneficial to wait a bit and see if resale contracts start dropping if heaven forbid, people need to off load them quickly.

 

[Matty B13]

The question was placed in the right place here, though. (Perhaps would be better in the 'purchasing' strand)
It's asking that if this is in fact that start of a recession, not saying that it for sure is one, what should we as owners/ potential buyers expect to see happen? I personally am curious as well, and moves like flipping a Riviera contract from buying in at $180 to selling at $100, and Poly points listed for under $130 show that potential changes may already be beginning.

The problem with Poly and CCV, and probably RIV is that a lot of owners buy in without knowing the true costs of Disney trips, after the pixie dust wears off, that yearly $5000 to $10,000 trip to Disney most people can't afford. Most of them have no idea they can rent their points out either, and just want to get rid of the contract.

I also think that DVC is hitting a price point that is to high for most people ($188/point), which is much steeper than $145/point that VGF was selling at a few years ago.

 

[CarolMN]

Looming recession???

Oh my...

Eventually, they will be correct. These predictions have been around for some time.


If unemployment hits middle and upper income earners and/or lots of people cut back on expensive vacations, we will see an increase in DVC (and other timeshare) contracts for sale and downward pressure on prices. I would expect to see a lot more contracts from the younger resorts available because those were more likely to have been financed.

 

[Marionnette]

"Those who cannot remember the past are condemned to repeat it."

With talk of a looming recession, I began to search the forums for member experiences through that time, hoping to gain insight into how they handled it.

I wonder how many owners stuck through the housing crisis and subsequent recession ca. 2007? Did you sell, did you buy more, did you rent out your points? I bet there are stories to be told that many of us would love to hear and learn from.

I did a little background reading that taught me prior to 2007, DVC was comprised of Old Key West, Board Walk Villas, Beach Club Villas, and Villas at Wilderness Lodge (2042 group). Interestingly, Animal Kingdom Lodge, Bay Lake Tower, Saratoga Springs Resort, Aulani, and Villas at Grand Californian (>2057 group) all were children of The Recession, all beginning sales within the first 3 years of the collapse. The direct cost graph took no dip, probably because opening sale prices factored the recession in! It is arguable that resale prices took a hit, but that's where old-timers come in and tell us anecdotal info.

DVC members through the collapse, please share with us your stories...

We bought for the first time during the recession at what i consider to be fire sale prices. BUT...we had no mortgage, no car loans and in fact, no debt at all. We also have a somewhat recession-proof business and continued to increase revenue during that period.

Our own circumstances are different now. House is still paid for. No debts at all. BUT...we are looking at slowly easing into retirement over the next 5 years. There will still be some income outside of our Social Security and retirement accounts, but it will be a fixed income. We are already economizing in order to bring our spending into what we anticipate our budget will be at that time. We aren’t looking to add to our expenses. Buying resale during the next recession would only come at the cost of selling currently owned contracts. And that would be a net negative gain.

 

[emchen]

Looming recession???

Oh my...

Haha..."...talk of..."

Went and underlined the emphasis just for you.

 

[bwvBound]

I did a little background reading that taught me prior to 2007, DVC was comprised of Old Key West, Board Walk Villas, Beach Club Villas, and Villas at Wilderness Lodge, Vero Beach Villas, Hilton Head Island (2042 group). Interestingly, Animal Kingdom Lodge, Bay Lake Tower, Saratoga Springs Resort, Aulani, and Villas at Grand Californian (>2057 group) all were children of The Recession, all beginning sales within the first 3 years of the collapse. The direct cost graph took no dip, probably because opening sale prices factored the recession in! It is arguable that resale prices took a hit, but that's where old-timers come in and tell us anecdotal info.

DVC members through the collapse, please share with us your stories...

FWIW, SSR opened in Oct 2004; we purchased in May 2004 (pre-opening).

 

[emchen]

FWIW, SSR opened in Oct 2004; we purchased in May 2004 (pre-opening).

Point taken, thank you...

So tell us about your ownership experience through that time!

 

[jerseyduke]

Disney has gotten more aggressive with ROFR, then could get even moreso if prices take a hit.

Direct sales could totally stall, since rack rates will be further discounted. The discounts they offer now are much less and fewer than they were in 2010

 

[CraigInPA]

In the last recession, DVC reached a point where they were exercising ROFR very, very infrequently. They had a shortage of buyers, and enough inventory not to have to ROFR older resorts. They also had new resorts coming online, so they had plenty to sell and an incentive to not add to the inventory of older resort points. Disney was hurting on cash rooms. I recall getting 35% off Poly one year, 25% off AND free dining at Poly another year, and whole long houses that were empty. I'd imagine that DVC also had room inventory that couldn't be rented, which could cause a shortage of cash to buy up those cheap ROFR contracts. In short, DVC hunkered down and rode it out.

 

[bwvBound]

So tell us about your ownership experience through that time!

FWIW, we made an unplanned, greatly unexpected purchase in Sept 2007 because the "offer was too good to refuse." On the very last day of our UY we stumbled into the Grand Cal preview center at Disneyland and were toured by a new-to-us west coast guide. She charmed us and surprised us. The incentives, that day, were stunning:

1. Current Year points (obviously)
2. Bonus Points (an additional full set of points)
3. New points the following day (triggered by the UY)
4. Discounted rate (rebate), I think
5. Two AP vouchers, no expiration to activate (which are currently valued as Platinum at WDW)

We were so surprised by the incentives that we purchased our largest single contract that day ... on a whim. Didn't see it coming.

Otherwise, our story is: bought, held. No other changes.

 

[emilymad]

We bought in 2011 so not even the worst of it for about 50% of what current resale prices is. We wish we had bought more points then. We are thinking about buying another contract but since we don't really "need" it we are going to wait and see if prices drop some.

 

[chalee94]

Disney has gotten more aggressive with ROFR, then could get even moreso if prices take a hit.

Direct sales could totally stall, since rack rates will be further discounted. The discounts they offer now are much less and fewer than they were in 2010

I would disagree based on the last recession. Dean mentioned that an OKW contract made it through ROFR at around $25 per point during the worst of it. Other than a handful of BCV contracts, Disney dropped all ROFR activity for around 18 months or so, IIRC.

It wouldn't make sense to me for direct sales to stall AND Disney to ramp up ROFR activity at the same time. Around 2008, Disney didn't want the inventory sitting there if buyers were scarce (and cash rentals weren't booming either, I'm sure.)

(Of course, in 2007-2008 we also had a spike in gas prices and I think Disney had a bit of a cash crunch as they hit a wall with securitizing their timeshare loans.)

My theory is that Disney's economic models will spot trouble before most Disboarders. As demand collapses, Disney will again drop 99% of their ROFR activity to avoid being stuck with too many contracts. Most of us will be too concerned with job uncertainty to pick up more DVC, even if it's a great deal. We'll see.

 

[jerseyduke]

Certainly possible. The thing that is different in my mind is that in 2008, I'd venture to say that there were some 'how will we feed the people' talks at higher levels, as there was probably great concern of a 2nd great depression.

Since resale prices may very well be correlated to how bad of a recession it would be, you are probably right. But if its a mild recession and OWK drops to 25 a point, DIS will grab that up to sell since they can not even build for much less per point.

2008 was just a different animal. Dis may have been thinking they might not be able to sell much DVC for years. If they think that that may be the case for a year only, then it makes sense to buy the cheap inventory (at resorts where it needs it). But again, I doubt that the thought of a short recession, with no fear of depression will crash resale prices like that.

 

[crisi]

It will be a bad recession. We really have only sort of recovered from the last recession in terms of employment and income for middle wage earners. Stock market is too high. Europe and Asia are reeling, and the tariffs are hitting the global economy hard. Interest rates are too low for the fed to be able to do much in terms of stimulating the economy through rate drops and taxes are low enough that a tax stimulus package will likely do more harm than good. Worldwide nationalism and protectionist policies are bad for economies - free trade tends to be a good thing - economically speaking, but expect protectionist economics to get more reactionary in a recession. And we are overdue - generally recessions hit every eight years and postponing one makes it worse. It will be an ugly one.

In those cases, for corporations, cash becomes king. Don't expect Disney to ROFR contracts, that uses up cash. Disney's theme park business is very tied to economic good times - and on a global scale - when consumer confidence goes, so does expensive Disney vacations.

In the last recession some people who bought in 2007 and 2008 ended up selling their contracts for less than they bought them for - sometimes with loans that needed to be paid off - because they needed to cash to pay their mortgage and feed their families. Some tried to rent and didn't find a market - although most of the in demand resorts owners continued to find renters. People who were in a position with cash to buy found great deals, but most people were pretty hunkered down, unsure if their own jobs would survive, or having other obligations - family members who hit tough times who moved in. We took an ABD trip in 2009 for less than half price and there were DVC contracts moving for half of what they go for now - in some cases less - which if you can afford it is a great deal - but the reason they were moving for so little was there were so few buyers.

 

[_auroraborealis_]

Also, keep in mind as we talk ROFR that Disney will be in foreclosure mode on a lot of diret Poly/CCV/Riviera contracts bought on 10-year-terms (and probs some 'sold out' resort direct contracts, although hard to guess proportionality there). A lot of people finance through Disney.