Supply is shrinking....look for higher prices in 2009

[joepreston]

I will admit that anyone purchasing a timeshare in the past month or so has recieved amazing deals. Do the math ...some 5 star resorts picked up at 20 cents on the dollar RESALE MARKET!! not DEVELOPER MARKET. This represents a few times when people will be able to get some great values at great resorts if they are patient.

Historically, Marriott exercisses the ROFR in the early part of the year, get their quota on let many sales go through at the end of the year. Not sure if this will be the same this year, but I would think Marriott will start to buy some come Jan and Feb.

Additionally, if they ever change their point system Which has been speculated), all buyers today would be grandfathered in...

Of course the economy is in tough shape, but adversity creates opportunity. I know I am abuyer trying to find deals...what are your thoughts? Besides EBAY is there another source that is equivalent for a representation of timeshares for sale?

THanks

-Joe

 

[Zac495]

Joe, I'd contact Seth Nock. He is a very respected resale broker here on TUG - works very hard to get the best price. He'll go after what price you want (within limits). I think others will agree he's very trustworthy. Not saying ebay isn't great - the deals are amazing - just answering your question of another resource. Happy timeshare hunting!

 

[FlyerBobcat]

I will admit that anyone purchasing a timeshare in the past month or so has recieved amazing deals. Do the math ...some 5 star resorts picked up at 20 cents on the dollar RESALE MARKET!! not DEVELOPER MARKET. This represents a few times when people will be able to get some great values at great resorts if they are patient.

Historically, Marriott exercisses the ROFR in the early part of the year, get their quota on let many sales go through at the end of the year. Not sure if this will be the same this year, but I would think Marriott will start to buy some come Jan and Feb......
-Joe

Joe,

Can you say a little more on why you state:
Supply is shrinking....look for higher prices in 2009 and I would think Marriott will start to buy some come Jan and Feb...... ???

What logic and/or set of facts went into coming to that conclusion? Just wondering.... Thx

 

[Big Matt]

Tom,
I'm with you. All I see is excess supply.

I get the local Williamsburg paper mailed to me (I grew up there and like to stay in touch). You should see all of the foreclosures. There have been about 5 thousand in Williamsburg across all the timeshares this year. Think about that on a larger scale.

 

[timeos2]

Buy only to use and at a great deal. ROFR is (thankfully) dead

Historically, Marriott exercisses the ROFR in the early part of the year, get their quota on let many sales go through at the end of the year. Not sure if this will be the same this year, but I would think Marriott will start to buy some come Jan and Feb.

Historically Marriott had cash on hand to exercise ROFR AND a ready retail market to sell that inventory to once obtained. Both have dried up and are unlikely to return to "normal" anytime soon if ever. There is no need for new inventory when you can't sell what you already have and the money to finance isn't available even if you find a buyer.

Not only is the supply of resales rising not shrinking but that trend is likely to accelerate not shrink in 2009. Bad time to recommend buying unless you have a specific resort/week you have wanted for personal use and you see it as a deal. Those can be great bargains in this current environment.

 

[Lawlar]

What Am I Missing?

"Supply is shrinking....look for higher prices in 2009"

Are you kidding me?????

 

[Andar]

It seems that last year this time, Ebay had over 1700 time shares listed.
Last night there were only 60 and only 1 in California.

 

[m61376]

There will be plenty of supply and likely prices will remain low until the economy rebounds. My personal opinion is that Marriott will again exercise ROFR when the credit market loosens, but that is likely not to be for some time. I think now is a great time to buy if you are purchasing for use; it may not be the bottom (some feel it will go significantly lower, others disagree), but if you are buying for use and get a good buy, your usage will likely compensate for any price fluctuation. Some people here contend now is the time to buy, some say wait- only you can decide. Many of us here have opted to pick up another unit or two lately.

 

[ondeadlin]

Supply may be shrinking, but that's hardly an indication prices will rise.

There were 28 home sales in my subdivision in 2007. I tracked them because I planned to appeal my tax assessment. The other night, I went to the township's website and looked up how many there were for 2008. There were 12.

Now, if you look at Realtor.com there is clearly less supply (i.e. fewer homes for sale), but the reason for that is the prices are so low that people are only selling if they have to. And this smaller supply has done nothing to stop the slide, as the last 3-4 sales have been the lowest yet.

IMO, the slip in timeshare prices will stop if Marriott resumes aggressively exercising ROFR. But I don't believe prices will go up. They almost never go up except for new resorts where the developer is aggressively raising prices phase-by-phase. That approach won't work now IMO. So I think even with ROFR back, prices will just stop sliding.

And I have no confidence ROFR is coming back at most resorts any time soon.

 

[joepreston]

Sorry...kind of new to posting

 

[joepreston]

Just to answer and respond to a few points others have made:

I have been watching the "liquid market" for timeshare resales over the past year (Ebay) and while some of these sales may have been bogus...many were true, legitimate comps for the timeshare industry. Although Dioxide has created a great resource for all of us....less than 5% of actual resales are reported on his site.

The comps show that the timeshare values have ALREADY been reduced by 50%. Last year there were 200 Marriott resales reported every month on Ebay. Today that number has been reduced by 60% and half of those auctions do not receive any bids at all (either unscrupulous sellers and/or price/reserve too high).

It is speculation, but as everyone knows, Marriott is a public company and reports quarterly to their shareholders. As the way every business operates, they need to "restock inventory" levels for the year. Will they start in January?... I don't know. BUT, when they do....prices will likely run again.

The underlying value is what does it cost to vacation every year? Maintenance fees at Newport Coast are less than $900. Any hotel on the coast in So. Cal will run $250 per night...just doing the math.

I guess I am trying to justify my potential purchase but I vacation at least two weeks a year and spend a lot of money on hotels, food etc...just thinking that with prices where they are today it would be hard to get hurt buying a quality timeshare that I plan on using every year.

It's funny, I am a stockbroker, and like the stock market (and maybe timeshares too) it is one of the few industries that when there is a 50% off sale... people are even more afraid to buy. Any other business you would have a line out the door.

 

[BocaBum99]

Supply may be shrinking, but that's hardly an indication prices will rise.

There were 28 home sales in my subdivision in 2007. I tracked them because I planned to appeal my tax assessment. The other night, I went to the township's website and looked up how many there were for 2008. There were 12.

Now, if you look at Realtor.com there is clearly less supply (i.e. fewer homes for sale), but the reason for that is the prices are so low that people are only selling if they have to. And this smaller supply has done nothing to stop the slide, as the last 3-4 sales have been the lowest yet.

IMO, the slip in timeshare prices will stop if Marriott resumes aggressively exercising ROFR. But I don't believe prices will go up. They almost never go up except for new resorts where the developer is aggressively raising prices phase-by-phase. That approach won't work now IMO. So I think even with ROFR back, prices will just stop sliding.

And I have no confidence ROFR is coming back at most resorts any time soon.

Now you are saying that "they almost never go up." That's better than what you've previously said which is that they never go up.

Prices will go up if Marriott is able to sell at a Retail price at a specific resort that is significantly higher than the current resale market will support and there isn't enough supply to meet their demand. It can be at any resort where Marriott has a sales presence, like Ocean Pointe, where the resort has been sold out for a while, but Platinum weeks are highly desirable.

It all depends on how fast the economy comes back and rental rates at those resorts firm up to the point where buying directly from Marriott makes sense again.

Also, let's take a look at Marriott Ko'Olina where I was just at last week. There is a resort right next to the Marriott which are whole condos called the Beach Villas at Ko'Olina. They are selling for over $1M for a 2 bedroom, 2 bath luxury condo. At 50 intervals and the lower cost units, you have the underlying real estate value of $20,000 for a single week. In checking various rental sites, I found rentals at this resort for between $2000-4000 per week depending on season. Not sure what they plan for occupancy rate, so the average weekly rent needs to be reduced by a factor to account for vacancies.

So, the real estate value for a Mariott Ko'Olina is roughly $20k. If you can buy one is this very bad market for between $5000-10000, you have to believe that Marriott is destroying more than $5000-15000 through its timeshare program to believe that is a bad value. And further that that destroyed value will NEVER be recaptured.

If you can pick up an oceanview annual 2br, 2bath Ko'Olina unit for $7500, that's not a bad deal. The whole condo equivalent would be less than $400k for an oceanview unit on the beach front in Ko'Olina at that price. That's a great deal in any market.

In addition, I asked various employees at the Marriott Ko'Olina what there occupancy rate is. They said it averages well over 90% and was closer to 96% for most of 2008. Marriott rents the 2br villas in the winter months for $644 per night. The Kama'aina rate for locals is $322 per night or $2250 per week for a mountain view unit. The maintenance fees are about $1400 per week.

If I could get an annual Ko'Olina for $7500 and Marriott can sell these units for $20k in the future which is significantly less than what they are selling for today, they will likely exercise any deals under $12k to provide them with a nice 40%+ margin.

If, and I repeat, If this scenario plays out, anyone who purchases these units for $7500 or below could see a nice increase in their equity.

It is possible that Marriott goes out of business, but if that happens, then it is more likely that the real estate will be sold off as condos and if they sell off for $1M for whole condos, then that weekly interval owner gets $20k instead of $12k.

You would really have to believe that Hawaii Real Estate will tank and never come back to believe that a $7500 purchase of a one week interval will NEVER be worth more than that $7500 to believe this is a bad deal. In fact, several on this message board have bought units in this price range for eoy and annual packages and they all believe they got a steal.

All I am doing is putting some math around the numbers so that people can understand the risks, downside and potential upside of such purchases.

 

[ondeadlin]

I guess I am trying to justify my potential purchase but I vacation at least two weeks a year and spend a lot of money on hotels, food etc...just thinking that with prices where they are today it would be hard to get hurt buying a quality timeshare that I plan on using every year.

I commend you for your honesty and self-awareness with this comment.

Bottom line? If you're buying to use, you love the resort, and you think the MFs are fair, that's all that matters. No need to justify anything past that whether prices rise or fall.

 

[ondeadlin]

Now you are saying that "they almost never go up." That's better than what you've previously said which is that they never go up.

Boca, you've become the Joker to my Batman on this subject (or maybe I'm the Joker to your Batman, not sure, lol).

Your "underlying real estate value" theory has - IMHO - been debunked many times here on TUG, i.e. because there is no way of putting all your timeshare weeks back together to ever get that value out of the property, a timeshare is essentially a completely different product with little valuation correllation to the underlying real estate.

But it's a simplistic and appealing theory timeshare salesmen always love in my experience.

I find your comparisons of rental rates to MFs much more convincing.

 

[thinze3]

... IMO, the slip in timeshare prices will stop if Marriott resumes aggressively exercising ROFR. But I don't believe prices will go up. They almost never go up except for new resorts where the developer is aggressively raising prices phase-by-phase. That approach won't work now IMO. So I think even with ROFR back, prices will just stop sliding.

And I have no confidence ROFR is coming back at most resorts any time soon.

When I bough my Waiohai several years ago of eBay, the eBay value went up $2-3K within 1-1/2 years of purchase. It is now down below what I paid, but not by much. Will Waiohai go back up in value? I don't know. But at least I know it can go up.

IMHO Marriott WILL begin exercising ROFR as soon as the market gets a bit better. I am not saying it won't get worse before it gets better, but it will get better. The reason Marriott will begin exercsisng ROFR is because Marriott cannot build timeshares cheaper than they can buy them at today's prices. Resale buyers will have to pay more than Marriott will match or those buyers will never own a Marriott.

Terry

 

[BocaBum99]

Boca, you've become the Joker to my Batman on this subject (or maybe I'm the Joker to your Batman, not sure, lol).

Your "underlying real estate value" theory has - IMHO - been debunked many times here on TUG, i.e. because there is no way of putting all your timeshare weeks back together to ever get that value out of the property, a timeshare is essentially a completely different product with little valuation correllation to the underlying real estate.

But it's a simplistic and appealing theory timeshare salesmen always love in my experience.

I find your comparisons of rental rates to MFs much more convincing.

Time will tell who is correct. You could be correct and resale prices for prime timeshares will never come back. It could be that Marriott resale timeshares at Ko'Olina will sell at $4000 or less from now on and never come back. I just doubt it. If I am right, it will most likely happen for the reasons I outline in this Marriott forum.

If we were talking about no name timeshares, I would be more inclined to agree with your conventional wisdom about timeshares. Notice that I did not say that my assessment would work for ANY timeshare. If we were talking about Orange Lake Country Club, for example, where 2br units are selling below $1000 and even below $500, I would agree with you completely. I don't see those prices coming back under any circumstances. Note that I am specifically limiting my assessment to prime resorts with high value brand names such as Marriott in prime locations. Any past assessment does not really apply since we haven't seen such a set of circumstances as we see today.

At this point, we are merely speaking our own opinions. Neither of us knows exactly what will happen. You use what you have seen in the past in timeshares to predict the future. The odds are in your favor because resort developers, including Marriott, take actions to devalue ownerships to enhance their own profit.

However, for certain Marriott's, I use input I have received directly from buyers, industry players and my own instincts about the market to make a prediction about the future. And, my theories are only theories. But, they are theories I am personally willing to bet on.

By the way, the argument about comparable condos will definitely work at the resort level for a Marriott such as Ko'Olina in a prime location. Given my analytical background, I don't think I could ever make a sale working for a resort developer by selling the dream for 200-400% above the resale price of a timeshare interval. I just can't sell something I don't believe in. If I believe I am ripping you off, it will show in my lack of enthusiasm in the sales process. I would hate my job. However, if the condos down the street are selling at equivalent of $20k per interval, I think I can sell intervals at that price with total enthusiasm. If Marriott is acquiring inventory at $12k or less, that may be a sustainable business model where everyone wins. I could definitely sell them at $7500 without any guilt whasoever even with you telling the buyer everything you are posting on this message board. I don't rely on deceit to make sales. In fact the marriage made in heaven are matching up sellers who share your opinion with buyers who share mine. Believe me, there are plenty in both camps.

Also, if this sales pitch works at the resort level, then it will create demand by Marriott at $20k. If it creates enough demand, then Marriott will exercise ROFR. If they do, then that will soak up the lowest price units therefore raising resale prices. For certain timeshares, I truly believe there are counterbalancing forces to will tend to raise resale prices once we get beyond this very bad economic environment.

 

[tombo]

It seems that last year this time, Ebay had over 1700 time shares listed.
Last night there were only 60 and only 1 in California.

There are currently 1230 timeshares listed of which 43 are California. There are also 48 Marriott.s listed for sale on e-bay currently. I am sure many timeshare wholesalers took a couple of weeks off for Christmas and New Years which is why there are fewer for sale than normal. By the second week in January i fully expect to see no less than 1500 for sale anytime you look and I also expect to see around 2000 e-bay timeshares for sale listed regularly through the spring.

I feel sure that timeshare resaleprices will get even worse before they get better. No one can know for sure, but if I was to place a wager, I would bet that we haven't come close to hitting bottom yet. As more resorts get more foreclosures and deed backs, MF's will have to go up. When MF's go up, the resort will get more deed backs, it is a downward spiral. The only reason that fewer timeshare might be for sale in the short term is because those who paid the 2009 MF's might try to vacation at their resort one more time before putting it up for sale next fall before they have to pay 2010 MF's. If the economy doesn't mprove, there is no telling how cheap a timeshare (any timeshare) will sell for in the fall. I hope I am wrong as I have several weeks I need to sell.

 

[BocaBum99]

Boca, you've become the Joker to my Batman on this subject (or maybe I'm the Joker to your Batman, not sure, lol).

Your "underlying real estate value" theory has - IMHO - been debunked many times here on TUG, i.e. because there is no way of putting all your timeshare weeks back together to ever get that value out of the property, a timeshare is essentially a completely different product with little valuation correllation to the underlying real estate.

But it's a simplistic and appealing theory timeshare salesmen always love in my experience.

I find your comparisons of rental rates to MFs much more convincing.

One more thing. One of the reforms in timesharing that I agree with PerryM on is that all timeshares should be ended after 30 years. At the end of that 30 year period, the owners need to either vote to keep it as a timeshare with 75% of the vote or allow the property to be sold off with the proceeds split according to a pre-determined formula. In this way, the value destruction that occurs when individual timeshare owners refuse to agree to a proposal to convert the timeshare to whole condos becomes moot. And, a 30 year old timeshare needs to be redone anywya. The timeshare owners can always agree to sell the property to a timeshare developer who will build a new resort for the owners for a good price.

 

[thinze3]

Does anyone know if any of the Marriott resorts have such a stipulation? My Christie Lodge resort DOES have such a stipulation and is to be sold in 8 more years I believe.

Terry

 

[timeos2]

Nice though t - isn't going to happen

One more thing. One of the reforms in timesharing that I agree with PerryM on is that all timeshares should be ended after 30 years. At the end of that 30 year period, the owners need to either vote to keep it as a timeshare with 75% of the vote or allow the property to be sold off with the proceeds split according to a pre-determined formula. In this way, the value destruction that occurs when individual timeshare owners refuse to agree to a proposal to convert the timeshare to whole condos becomes moot. And, a 30 year old timeshare needs to be redone anywya. The timeshare owners can always agree to sell the property to a timeshare developer who will build a new resort for the owners for a good price.

But that cannot be done retroactively without the same owners vote percentage neded that it would also take to disband the timeshare. Both are virtually impossible to do as it is nearly impossible to get the high percentage of owners to reply and to reach the super-majority "yes" vote required.

A possible answer for newly formed timeshare associations IF the developers chose to form them with those rules but even that seems unlikely.

 

[joepreston]

There are currently 1230 timeshares listed of which 43 are California. There are also 48 Marriott.s listed for sale on e-bay currently.

I believe your numbers are incorrect. I just ran a search and got about half of what you indicate.

 

[BocaBum99]

But that cannot be done retroactively without the same owners vote percentage neded that it would also take to disband the timeshare. Both are virtually impossible to do as it is nearly impossible to get the high percentage of owners to reply and to reach the super-majority "yes" vote required.

A possible answer for newly formed timeshare associations IF the developers chose to form them with those rules but even that seems unlikely.

If timeshare armagedon happens, I think it will be very possible. If a resort goes bankrupt, shuts down operations and all title becomes unmarketable, I believe it is possible for such a termination of a timeshare plan with proceeds distributed to owners.

All the board has to do is to bankrupt the timeshare and shut it down completely. The day is ceases operations, send out a proxy vote for the owners to either vote for 1) complete renovation and restoration of the resort for a special assessment of $20k each with MF at quadruple what it was the year before or 2) disband the timeshare plan, sell off the property, and distribute proceeds to current owners.

If that doesn't work because there are some owners who won't give up, try to get the local government to exercise eminent domain so that the rest of the owners can't be held hostage by a small number of obstinent owners.

I don't know if it would work, but it's an approach.

 

[timeos2]

ROFR has been exposed as what it is

IMHO Marriott WILL begin exercising ROFR as soon as the market gets a bit better. I am not saying it won't get worse before it gets better, but it will get better. The reason Marriott will begin exercsisng ROFR is because Marriott cannot build timeshares cheaper than they can buy them at today's prices. Resale buyers will have to pay more than Marriott will match or those buyers will never own a Marriott.

Terry

Belaboring the beaten horse. ROFR does not raise the price sold or paid - it just changes who got the deal. Now that buyers know what the true value of the weeks are they aren't likely to be suckered a second time by the nonsense of ROFR and "needing to beat that price". They will just wait and bid low until the very small amount of inventory needed gets taken and then the bargains roll to them again. Meanwhile the sellers can't get the bite (real sales offer) required to trigger ROFR unless they price at the now low levels expected. And, if ROFR is back, that's what they will get. No more. The bogus "heyday" of ROFR is over and has been exposed as the sham it was always portrayed as by anyone that actually studied it.

Dave - As this thread IS discussing values as related to ROFR hopefully this input can stand.

 

[tombo]

I believe your numbers are incorrect. I just ran a search and got about half of what you indicate.

I just copied and pasted these results from my e-bay searches:


1,236 results found for timeshares[ Save this searchSaved toMy eBay. ]



48 results found for Marriott timeshares[ Save this searchSaved toMy eBay. ]


43 results found for timeshares, California[ Save this searchSaved toMy eBay. ]

 

[BocaBum99]

Belaboring the beaten horse. ROFR does not raise the price sold or paid - it just changes who got the deal. Now that buyers know what the true value of the weeks are they aren't likely to be suckered a second time by the nonsense of ROFR and "needing to beat that price". They will just wait and bid low until the very small amount of inventory needed gets taken and then the bargains roll to them again. Meanwhile the sellers can't get the bite (real sales offer) required to trigger ROFR unless they price at the now low levels expected. And, if ROFR is back, that's what they will get. No more. The bogus "heyday" of ROFR is over and has been exposed as the sham it was always portrayed as by anyone that actually studied it.

Dave - As this thread IS discussing values as related to ROFR hopefully this input can stand.

Thie above is an incorrect assumption. There are always new buyers coming into the market who have no knowledge about what the historic price changes have been for timeshares. All they see are the prices they find via the internet or other method. If the price is offered at a price that makes sense to them and fits their budget, they buy.

I have studied ROFR in quite some detail. Much more than most on this message board. As a result of that study, I have changed my opinion on what ROFR does. I used to believe in the free market theory about what it does. That belief is that it just distorts the market with only negative consequences. Now, I believe it has a more positive effect than negative effect.

What happens that I didn't expect is that it creates a much more orderly resale market. That orderly market makes up for the lack of efficiency in the market. In the past, I only considered the negative impacts. Experience showed me the positives.

The artificial price supports are very much mirages as we see now. But, as long as they are in effect and the resort developer can sell them at retail prices, ROFR continues to help smart buyers and hose unknowing sellers.