Recession Question

[sky2823]

One observation that could be wrong but...


if you look at a loaded contract, banked points, (full points for the next year) it doesn’t seem the points get as much value as they should compared to the price point


Meaning, (I’m making this up) where a loaded 100 pt SSR contract might sell for $110, a stripped SSR contract (no 2017/18/19) won’t sell for much lower than say $95 in today’s ROFR market


That 100 points X $15 on price point discount is $1,500 difference in aggregate price for the contract


However, those 300 points stripped from the contract would be almost double that as rental points on open market


It’s early and I am not fully caffeinated so please forgive me if my math is totally wrong.


However, this seems to indicate an inefficient market as ROFR sets the floor on these contracts regardless of true value to the consumer...


The seller can’t discount a stripped contract any lower than the expect rofr price even if it has lower value than the price.


Without a “true floor” the market by definition is being propped up.


It would be like the government buying Apple stock as soon as it dips below a certain point. Investors would buy as their risk would be mitigated (perception anyway) and Apple would be overvalued.

Think how overvalued the stock market would be if there was an rofr...

It completely mitigates a lot of risk unless a terrible recession and Disney has problems...

I concede there are other market factors and supply and demand does play a part, but I would argue having a market floor is very large in this market valuation.

 

[kboo]

In this case, the “invisible hand” wears a white glove.

Haha! Also remember that the users here are uber-users who (even if we've only been researching here for a few months) have WAYYYY more information than many of the people who buy DVC and are completely unaware of the resale market. Just look at some of the FB boards, for example, for how misinformed many, many owners are.

The disconnect, I think, is that people like sky2823, Jerry5788, and me have been following the resale contracts over the last six months and we can attest first hand to the market reacting to ROFR in practice. I've had three separate conversations with three different brokers specifically around how ROFR will not allow my offer to pass. More specifically, people like Jerry and I are shameless lowballers and will constantly test where that floor is. If ROFR didn't exist, buyers would be much more encouraged by some of the deals Jerry has been able to enter into contract on and would in turn make similar offers.

I'm a pretty shameless lowballer too. Maybe not as much as you guys, but because of that, I have actually had some interesting conversations with many brokers. I think ROFR has a greater effect on brokers and what they tell their sellers their contract may sell for. Buyers can be informed or misinformed, and may choose to buy direct or resale, but every owner who chooses to sell has to go through the resale process. For some, who have owned their points forever, (eg. direct buyers 25 years ago), it doesn't matter much to them whether they sell at $100 or $110 or $95, and if they're not under financial pressure to sell, they may not care how long their contract sits, or care about ROFR. They'll get their $ anyway.

Something along those lines did actually happen recently. If you were on the ROFR thread you would have noted that the majority of SSR and AKV contracts were being taken back by DVC. So, the solution? Brokers recommended sellers raise the price they were selling for and buyers started offering higher.

THIS!!!
Brokers react to the ROFR as well - and given the many uninformed DVC owners out there - probably have a greater effect on the market than the DIS readers. If anything, ROFR sends a message to brokers that then gets conveyed to sellers. Last year I was working with a few different brokers and had interesting experiences - one who was helping me find a BWV contract offered one at 85$pp when these boards were showing offers accepted and passing ROFR at over $100. I have had brokers tell me my offer was too low (they didn't out and out refuse to bring the offer to them), by saying "They won't accept it, they just turned down an offer without even countering, at exactly what you offered." (Or "turned down an offer of X+2 what you offered") To which, I just said, "ok, thanks for your time," and hung up.

I also had another broker (who was trying to sell me something else) say, "Good luck with that - I've never seen Grand Floridian pass below $X," to which I said, "Thank you for your input - we'll see, and if that doesn't work out, I will call you back." And then closed on Grand Floridian at $X-10.

I bear no ill will toward any of the brokers for any of this - they are working to get reasonably quick sales based on the information available to them, and it's not an emotional thing for me. If it doesn't work out, I will move on to make an offer on the next contract that suits my needs. NBD. (Then again, I haven't yet had a contract taken in ROFR, so I am not as good a lowballer as some of the other people on this board. Maybe I could go lower...Oh wait, DH has put the brakes on buying more for now.)

 

[ELMC]

Something along those lines did actually happen recently. If you were on the ROFR thread you would have noted that the majority of SSR and AKV contracts were being taken back by DVC. So, the solution? Brokers recommended sellers raise the price they were selling for and buyers started offering higher.

To add to your point, the brokers do this for reasons other than ROFR as well. An optimistic person would say that they are trying to normalize the market, keeping supply and demand in check by not creating a demand surge caused by lower priced contracts. A more cynical person would say that they're trying to beef up the prices to beef up their commissions. Regardless, it brings me back to the point that the answer is somewhere in the middle ground. I think it's naive to say that ROFR does not have any impact on resale prices, and I think it's a bit of a stretch to say that it is the cause for resale prices. The answer most likely lies somewhere in the middle and contains elements of both.

A larger point to consider (and this is more of a general comment than a reply to your specific post) is that if one wants to look at the reason for the floor of resale contract pricing it would be a good idea to analyze the relationship between resale prices vs. retail prices; resale prices vs. hotel rack rates; and resale prices vs. point rental prices. I think those three variables all have just a significant (if not more so) on resale prices than does ROFR.

 

[ELMC]

One observation that could be wrong but...


if you look at a loaded contract, banked points, (full points for the next year) it doesn’t seem the points get as much value as they should compared to the price point

[SNIP]

However, this seems to indicate an inefficient market as ROFR sets the floor on these contracts regardless of true value to the consumer...


The seller can’t discount a stripped contract any lower than the expect rofr price even if it has lower value than the price.


Without a “true floor” the market by definition is being propped up.


It would be like the government buying Apple stock as soon as it dips below a certain point. Investors would buy as their risk would be mitigated (perception anyway) and Apple would be overvalued.

Think how overvalued the stock market would be if there was an rofr...

It completely mitigates a lot of risk unless a terrible recession and Disney has problems...

I concede there are other market factors and supply and demand does play a part, but I would argue having a market floor is very large in this market valuation.

You raise an excellent point and if you search these forums you'll see that very topic dissected about a hundred different ways. All hyperbole aside, I agree with your conclusion about the market being inefficient as it applies to stripped vs. loaded contracts, but I'm going to disagree with your assertion that ROFR is propping up the value of the stripped contracts.

Your Apple comparison is similar but not exact. There's not a set floor for ROFR where Disney automatically steps in, so it doesn't establish a floor. It suggests one, but doesn't cleanly set it. We may set it in our minds, but that's not the same as a hard and fast ROFR floor.

Like I said, you're right about the inefficiency of the market, but it does not show up in the inability of a seller to discount a stripped contract. It actually shows up in the inability of a seller to achieve a fair market price for a loaded one.

 

[crisi]

To add to your point, the brokers do this for reasons other than ROFR as well. An optimistic person would say that they are trying to normalize the market, keeping supply and demand in check by not creating a demand surge caused by lower priced contracts. A more cynical person would say that they're trying to beef up the prices to beef up their commissions. Regardless, it brings me back to the point that the answer is somewhere in the middle ground. I think it's naive to say that ROFR does not have any impact on resale prices, and I think it's a bit of a stretch to say that it is the cause for resale prices. The answer most likely lies somewhere in the middle and contains elements of both.

Brokers are also in the business of making buyers and sellers happy - especially since so many owners will buy or sell more than one contract. While kboo isn't emotional about her contracts - most people want their sale to go through smoothly - and expect the broker to facilitate that. Making an offer on a contract, waiting a few weeks while paperwork moves around, and then having to start over because of ROFR is probably disappointing to most buyers - and they expect the broker to be able to ensure that doesn't happen. Likewise, for a seller, accepting a lowball offer and then having Disney ROFR it, means that you probably should have asked for - and gotten - another dollar or two per point - and while many owners aren't too sensitive to a few hundred dollars - its also a few hundred in free money that I want the broker to guide me on to make sure I don't leave easy money on the table.

It isn't in any brokers best interest to risk ROFR on either side - having the combination of a buyer who isn't emotionally invested in closing quickly - and in THIS contract - and a seller who will leave a few hundred on the table and shrug - that probably doesn't come up that often. If the contract gets ROFR'd, the broker will be dealing with one and possibly two unsatisfied customers.

 

[Ben E N]

Brokers are also in the business of making buyers and sellers happy - especially since so many owners will buy or sell more than one contract. While kboo isn't emotional about her contracts - most people want their sale to go through smoothly - and expect the broker to facilitate that. Making an offer on a contract, waiting a few weeks while paperwork moves around, and then having to start over because of ROFR is probably disappointing to most buyers - and they expect the broker to be able to ensure that doesn't happen. Likewise, for a seller, accepting a lowball offer and then having Disney ROFR it, means that you probably should have asked for - and gotten - another dollar or two per point - and while many owners aren't too sensitive to a few hundred dollars - its also a few hundred in free money that I want the broker to guide me on to make sure I don't leave easy money on the table.

It isn't in any brokers best interest to risk ROFR on either side - having the combination of a buyer who isn't emotionally invested in closing quickly - and in THIS contract - and a seller who will leave a few hundred on the table and shrug - that probably doesn't come up that often. If the contract gets ROFR'd, the broker will be dealing with one and possibly two unsatisfied customers.

I was on the almost opposite side of kboo in the buying equation. I found the perfect contract at a really great price and didn't want to lose it. Even though my at asking price offer was accepted, I was afraid Disney would ROFR it. I actually upped my offer by $800. I may have been throwing that money away, but I have not seen a similar contract to that one go for less than what I paid since I have been looking. In my case, ROFR artificially increased the selling price of a contract, and may have played a role in the huge increase in BLT selling prices that we saw throughout last fall.

 

[Bing Showei]

I think it's naive to say that ROFR does not have any impact on resale prices, and I think it's a bit of a stretch to say that it is the cause for resale prices.

A larger point to consider (and this is more of a general comment than a reply to your specific post) is that if one wants to look at the reason for the floor of resale contract pricing it would be a good idea to analyze the relationship between resale prices vs. retail prices; resale prices vs. hotel rack rates; and resale prices vs. point rental prices. I think those three variables all have just a significant (if not more so) on resale prices than does ROFR.

I think the flaw in my initial assertion is that it was not narrow enough in scope. To say all of an ecosystem with multiple home resorts that function differently from one another is a painting with a pretty broad stroke.

When you look at VGC, for example, I would agree that ROFR has little to no bearing on the price reflected in resale and that this particular resort is driven not only by supply and demand, but by the price DVD set for VGC direct (chicken/egg?). Shortly before the announced price increase on 1/17/2018, two contracts for VGC went to ROFR for $125/pt on one broker's site (don't know if it passed). But almost immediately after VGC jumped to $235/pt, resale prices jumped to north of $200/pt. While I don't think it is unreasonable to see this as DVD having a hand in setting a market price, a strong argument could be made - and I would have trouble arguing otherwise, that the 27% price increase is more reflective of a supply/demand rebalancing.

Where I think I would stand my ground on market manipulation playing a significant role in resale prices is when you look at what a consumer would consider a "value" buy-in to the system. The prime candidates there are SSR, OKV, maybe AKV (to a lesser degree). As an entry in the system, these on-site resorts represent the greatest opportunity for buyers to join DVC at a bargain rate. As such, CCV/Aulani as the only official/advertised offerings into DVC are, to a degree, competing with these three resorts. Without going into the value of buying the extra RTU years, the location benefits of CCV, etc, when you push the bargain resorts up high enough, they begin to bridge with your BLTs and then it's not a leap to look at $140 for a BLT vs maybe a $165 (with incentives) of a CCV contract. SSR, OKV, and AKV have, in recent months, seem to be targeted for ROFR buyback.

While the price leaps in PVB, VGF, and VGC have played a significant role in the resale prices of those properties, the price increases in SSR, OKV, and AKV were minimal ($6/pt) and do not seem proportional to the price increases we have seen on the retail market, which I maintain have been largely driven by ROFR, whether that is by way of buyers getting gun shy offering lower, or brokers using that to encourage their sellers to ask for more.

 

[ELMC]

While the price leaps in PVB, VGF, and VGC have played a significant role in the resale prices of those properties, the price increases in SSR, OKV, and AKV were minimal ($6/pt) and do not seem proportional to the price increases we have seen on the retail market, which I maintain have been largely driven by ROFR, whether that is by way of buyers getting gun shy offering lower, or brokers using that to encourage their sellers to ask for more.

I agree with much of what you said in your post above, but I did want to probe this point a little further. I would also suggest that the increase in prices in the higher end properties are pulling the likes of SSR and OKW up by shifting demand and a variety of other possible reasons. Basically the size of the gap caused people to rethink their BLT or VGF purchase when the value proposition was so great. BLT at $110 or SSR at $85, no big deal. BLT at $140 or SSR at $90, now you have to make a buying decision.

But to your point above. What do you think would happen to prices at these three resorts if Disney declared that they were suspending any ROFR purchases for the next 24 months? Now we're into pure theory here, but it's an interesting exercise if you're willing.

 

[Dean]

One observation that could be wrong but...


if you look at a loaded contract, banked points, (full points for the next year) it doesn’t seem the points get as much value as they should compared to the price point


Meaning, (I’m making this up) where a loaded 100 pt SSR contract might sell for $110, a stripped SSR contract (no 2017/18/19) won’t sell for much lower than say $95 in today’s ROFR market


That 100 points X $15 on price point discount is $1,500 difference in aggregate price for the contract


However, those 300 points stripped from the contract would be almost double that as rental points on open market


It’s early and I am not fully caffeinated so please forgive me if my math is totally wrong.


However, this seems to indicate an inefficient market as ROFR sets the floor on these contracts regardless of true value to the consumer...


The seller can’t discount a stripped contract any lower than the expect rofr price even if it has lower value than the price.


Without a “true floor” the market by definition is being propped up.


It would be like the government buying Apple stock as soon as it dips below a certain point. Investors would buy as their risk would be mitigated (perception anyway) and Apple would be overvalued.

Think how overvalued the stock market would be if there was an rofr...

It completely mitigates a lot of risk unless a terrible recession and Disney has problems...

I concede there are other market factors and supply and demand does play a part, but I would argue having a market floor is very large in this market valuation.

It's true that fully stripped contracts don't sell for as little or fully loaded as much as the value of the underlying points. The spread between the 2 should be in the $25 per point range (price of 2 years of full points and a year of banked points). Therefore the more loaded one can get the better the value tends to be. But the other factors of lead time to use the banked points, UY, home resort and price all come into play as well.

 

[sky2823]

I think you would definitely have a correction if they suspended those 3 resorts from ROFR, but academically speaking not sure by how much... Right off the bat you would have the distressed sellers (deaths, bankruptcies etc...) hitting the market which might be small but it still would add to the correction. Then the stripped contracts which would contribute. Finally what ever bubble exists from the rofrs would be deflated until a market equilibrium was found.

Since the value of SSR and OKW seem to be directly related to the ability to book higher end resorts at 7 months without paying the premium on points for those resorts as long as that ability exists at 7 months they still will have value.

OFF TOPIC - Now if you want to ponder what would happen if Disney went to a “tiered” resort system where different levels of resorts had different windows of booking at non-home resorts (eg VGF and Poly homeowners could book Riviera earlier than SSR owners etc...) and what would happen to prices to SSR and OKW then....

I don’t know if they would ever do it, but it wouldn’t shock me if they haven’t pondered it in a brainstorming meeting or something

I am sure it would be controversial and very delicate without creating other issues, but its another lever they could pull to drive additional direct sales on new properties creating a “premium” booking window for newer/ high demand resorts they are selling...

Perks and Home Window are their superpowers at this point to drive direct

 

[Bing Showei]

But to your point above. What do you think would happen to prices at these three resorts if Disney declared that they were suspending any ROFR purchases for the next 24 months? Now we're into pure theory here, but it's an interesting exercise if you're willing.

Ooh, ooh. I’ll play.

So I feel there exists a very natural progression in price increase. As the economy continues to hum along and families have more disposable income, discretionary spendings follow upward; normal market forces. I recognize that this is not completely absent in the establishment of current resale prices.

However, if DVD announced they were suspending ROFR for 24 months, I see this as affecting sellers and buyers independently.

On the sellers' side, the first thing that would happen would be a sharp increase of frustration on the part of sellers and brokers at the flood of lowball offers that come in unreflective of the true value of the product. People will inundate the brokers with low offers to the point where brokers will have a generic cut-and-paste response along the lines of "Thank you for offer, but the seller is not willing to go that low. When you have an offer much closer to asking, please do reach out." And brokers will start to have honest conversations with sellers and instead of relying on "This is what has been taken in ROFR lately, so we recommend you start here." Those conversations will include, "You'll get a lot of lowball offers. How much are you realistically willing to go below your asking price? Because I have this awesome 'cut-and-paste' job that I do for lowballers." Here is where sellers will start to establish their own floor. How low that floor goes will depend on how many distressed sellers there are in the market. When 401Ks are humming along and people are flush with money, maybe not much. But there are always people who are motivated to sell, and left to sellers alone on how low they can go, the bottom will drop and bring a percentage of the other contracts with it. Several of the $115/point SSR contracts will sit around until the natural progression of the market gets up to that point. Some will wait it out, others will realize $95/pt is not unreasonable.

On the buyer's side, those who are less educated in the value of those SSR points will get their $45/pt offers rejected over, and over, and over again. They'll realize that their expectations are unreal and will either drop out of the market or recalibrate their expectations. During this readjustment time, there will be a contingency of buyers who are familiar with how prices have tracked since before and after the recent price increase, and they'll come in with offers above the mess of nonstarter $45/pt offers, making their offer not seem unreasonable. Should this buyer fail to find success with one broker, they will simply move on to another broker. Eventually someone will sell at that price. Those buyers tend to be the kind of people who share on these forums. As it becomes clear to this community and on other sites that the opportunity to negotiate lower prices (absent ROFR) exists, more people will test that floor, and prices will be pulled down accordingly.

While this rebalancing would introduce market-low outliers across all resorts, I don't see the broader market prices for resale on most resorts dropping significantly. I do see a larger percentage of contracts selling for below where they are now at SSR, OKV, and AKV which have seen disproportionate ROFR activity of late.

How's that? Feel free to pick this analysis apart as I know my own perceptions of how a free market would behave, with SSR points in particular, is colored by my own frustrated pursuit of a decently priced contract there. So have at it.

 

[crisi]

I'll pick it apart a little. My guess is most owners who are selling don't need to free up all that capital at once. Renting those points out through a broker takes almost no effort, and will net them out about $9 a point over dues. So many owners will look at lowball offers and say "well, if that's the case, I'll just rent until the market rebounds" and as long as there is a profit over dues, and the owners don't have loans on their DVC or don't need the capital for another purpose, owners will rent rather than sell at what they believe is below value, which will further support prices.

 

[ELMC]

Ooh, ooh. I’ll play.

So I feel there exists a very natural progression in price increase. As the economy continues to hum along and families have more disposable income, discretionary spendings follow upward; normal market forces. I recognize that this is not completely absent in the establishment of current resale prices.

However, if DVD announced they were suspending ROFR for 24 months, I see this as affecting sellers and buyers independently.

On the sellers' side, the first thing that would happen would be a sharp increase of frustration on the part of sellers and brokers at the flood of lowball offers that come in unreflective of the true value of the product. People will inundate the brokers with low offers to the point where brokers will have a generic cut-and-paste response along the lines of "Thank you for offer, but the seller is not willing to go that low. When you have an offer much closer to asking, please do reach out." And brokers will start to have honest conversations with sellers and instead of relying on "This is what has been taken in ROFR lately, so we recommend you start here." Those conversations will include, "You'll get a lot of lowball offers. How much are you realistically willing to go below your asking price? Because I have this awesome 'cut-and-paste' job that I do for lowballers." Here is where sellers will start to establish their own floor. How low that floor goes will depend on how many distressed sellers there are in the market. When 401Ks are humming along and people are flush with money, maybe not much. But there are always people who are motivated to sell, and left to sellers alone on how low they can go, the bottom will drop and bring a percentage of the other contracts with it. Several of the $115/point SSR contracts will sit around until the natural progression of the market gets up to that point. Some will wait it out, others will realize $95/pt is not unreasonable.

On the buyer's side, those who are less educated in the value of those SSR points will get their $45/pt offers rejected over, and over, and over again. They'll realize that their expectations are unreal and will either drop out of the market or recalibrate their expectations. During this readjustment time, there will be a contingency of buyers who are familiar with how prices have tracked since before and after the recent price increase, and they'll come in with offers above the mess of nonstarter $45/pt offers, making their offer not seem unreasonable. Should this buyer fail to find success with one broker, they will simply move on to another broker. Eventually someone will sell at that price. Those buyers tend to be the kind of people who share on these forums. As it becomes clear to this community and on other sites that the opportunity to negotiate lower prices (absent ROFR) exists, more people will test that floor, and prices will be pulled down accordingly.

While this rebalancing would introduce market-low outliers across all resorts, I don't see the broader market prices for resale on most resorts dropping significantly. I do see a larger percentage of contracts selling for below where they are now at SSR, OKV, and AKV which have seen disproportionate ROFR activity of late.

How's that? Feel free to pick this analysis apart as I know my own perceptions of how a free market would behave, with SSR points in particular, is colored by my own frustrated pursuit of a decently priced contract there. So have at it.

Thanks for the reply. I'm not really going to pick your analysis apart...I was asking the question because I was genuinely interested to hear what you thought and I appreciate your putting it out there. The one variable in the equation that I will question is that I'm not entirely sure that we here on the DIS make up a significant percentage of the DVC resale buyer population. So on that point I'm not exactly sure how much of an impact we have on the overall market.

Bringing it back to your personal goals for a second, you are looking to purchase resale in the biggest seller's market in the history of DVC resales. Prices are at an all time high both absolutely and adjusted for inflation. I wish you luck finding what you're looking for, but it's going to be tough. But I'm not telling you anything you don't already know.

 

[Bing Showei]

I'll pick it apart a little. My guess is most owners who are selling don't need to free up all that capital at once. Renting those points out through a broker takes almost no effort, and will net them out about $9 a point over dues. So many owners will look at lowball offers and say "well, if that's the case, I'll just rent until the market rebounds" and as long as there is a profit over dues, and the owners don't have loans on their DVC or don't need the capital for another purpose, owners will rent rather than sell at what they believe is below value, which will further support prices.

I suspect a good number of sellers sell because they just want out of the game. They may not need the capital, but they just want to be able to walk away from it. My resale sellers were a lawyer couple and a couple where the husband was c level for a multinational - no clue what the finances were beneath the surface, of course, but superficially, I would guess they all had money. The contract I got ROFRd was owned by a gentleman who I also suspect made decent money (based on my online stalking) but really didn't care to squeeze every last dollar out of the sale, according to the broker. As little work as it is, and I agree this is the route I, and most users on this board, would go if looking to sell and the bottom fell out of the market, I don't think all that many sellers know they can go this route, and even if they do know about it, I'm not sure that many people would want to put in the effort. Someone dealing with a divorce or death may want to just liquidate and walk away.

 

[Dean]

Ooh, ooh. I’ll play.

So I feel there exists a very natural progression in price increase. As the economy continues to hum along and families have more disposable income, discretionary spendings follow upward; normal market forces. I recognize that this is not completely absent in the establishment of current resale prices.

However, if DVD announced they were suspending ROFR for 24 months, I see this as affecting sellers and buyers independently.

On the sellers' side, the first thing that would happen would be a sharp increase of frustration on the part of sellers and brokers at the flood of lowball offers that come in unreflective of the true value of the product. People will inundate the brokers with low offers to the point where brokers will have a generic cut-and-paste response along the lines of "Thank you for offer, but the seller is not willing to go that low. When you have an offer much closer to asking, please do reach out." And brokers will start to have honest conversations with sellers and instead of relying on "This is what has been taken in ROFR lately, so we recommend you start here." Those conversations will include, "You'll get a lot of lowball offers. How much are you realistically willing to go below your asking price? Because I have this awesome 'cut-and-paste' job that I do for lowballers." Here is where sellers will start to establish their own floor. How low that floor goes will depend on how many distressed sellers there are in the market. When 401Ks are humming along and people are flush with money, maybe not much. But there are always people who are motivated to sell, and left to sellers alone on how low they can go, the bottom will drop and bring a percentage of the other contracts with it. Several of the $115/point SSR contracts will sit around until the natural progression of the market gets up to that point. Some will wait it out, others will realize $95/pt is not unreasonable.

On the buyer's side, those who are less educated in the value of those SSR points will get their $45/pt offers rejected over, and over, and over again. They'll realize that their expectations are unreal and will either drop out of the market or recalibrate their expectations. During this readjustment time, there will be a contingency of buyers who are familiar with how prices have tracked since before and after the recent price increase, and they'll come in with offers above the mess of nonstarter $45/pt offers, making their offer not seem unreasonable. Should this buyer fail to find success with one broker, they will simply move on to another broker. Eventually someone will sell at that price. Those buyers tend to be the kind of people who share on these forums. As it becomes clear to this community and on other sites that the opportunity to negotiate lower prices (absent ROFR) exists, more people will test that floor, and prices will be pulled down accordingly.

While this rebalancing would introduce market-low outliers across all resorts, I don't see the broader market prices for resale on most resorts dropping significantly. I do see a larger percentage of contracts selling for below where they are now at SSR, OKV, and AKV which have seen disproportionate ROFR activity of late.

How's that? Feel free to pick this analysis apart as I know my own perceptions of how a free market would behave, with SSR points in particular, is colored by my own frustrated pursuit of a decently priced contract there. So have at it.

I doubt ROFR is making much difference currently but it really doesn't matter much. But if things fall apart from an economy standpoint there's a rapid free fall because ROFR likely drops to almost nothing, some have to sell, some will decide to sell for a number of reasons and less people will be buying. That floor was roughly half last time. But there is a floor though what it is depends in large part on the severity of any recession.

 

[CraigInPA]

I think you would definitely have a correction if they suspended those 3 resorts from ROFR, but academically speaking not sure by how much... Right off the bat you would have the distressed sellers (deaths, bankruptcies etc...) hitting the market which might be small but it still would add to the correction. Then the stripped contracts which would contribute. Finally what ever bubble exists from the rofrs would be deflated until a market equilibrium was found.

Since the value of SSR and OKW seem to be directly related to the ability to book higher end resorts at 7 months without paying the premium on points for those resorts as long as that ability exists at 7 months they still will have value.

An interesting viewpoint, and one not to be dismissed, is the ability to swap at 7 months. As swapping has become more difficult during almost half of the year, and will likely continue to get worse over time, I foresee those resorts in high demand continuing to rise in value, with a slower rise in value to SSR and OKW.

 

[crisi]

I suspect a good number of sellers sell because they just want out of the game. They may not need the capital, but they just want to be able to walk away from it. My resale sellers were a lawyer couple and a couple where the husband was c level for a multinational - no clue what the finances were beneath the surface, of course, but superficially, I would guess they all had money. The contract I got ROFRd was owned by a gentleman who I also suspect made decent money (based on my online stalking) but really didn't care to squeeze every last dollar out of the sale, according to the broker. As little work as it is, and I agree this is the route I, and most users on this board, would go if looking to sell and the bottom fell out of the market, I don't think all that many sellers know they can go this route, and even if they do know about it, I'm not sure that many people would want to put in the effort. Someone dealing with a divorce or death may want to just liquidate and walk away.

Yes, but there is a floor to value that most owners are going to be willing to accept - especially if the situation is a recession and prices are likely to come back in a year or three. There is a difference between selling the car you no longer want for $8,000 rather than $10,000 - and letting your car you think is worth $10,000 go for $800 to a stranger just to be rid of it

 

[Bing Showei]

Yes, but there is a floor to value that most owners are going to be willing to accept - especially if the situation is a recession and prices are likely to come back in a year or three. There is a difference between selling the car you no longer want for $8,000 rather than $10,000 - and letting your car you think is worth $10,000 go for $800 to a stranger just to be rid of it

Oh, I agree. And using your analogy above, I've never been of the mindset that ROFR prevents SSR from dropping to $8/point. But I absolutely do believe that absent ROFR, $80 point would not be uncommon. I just don't think the floor that exists now on SSR is established by supply and demand. That's Mickey down there holding it up... and I can't help but want to gut punch him.

 

[gumbydom]

It will be interesting to see what happens in the next few months if DVD will allow prices to drop.

 

[MooseBucks]

It will be interesting to see what happens in the next few months if DVD will allow prices to drop.

I’d assume they have to let them fall at least temporarily.