The Fractional industry’s woes are twofold. First, developers are having a hard time selling new units because of the glut in resales. At the same time, the seized-up credit markets are making it difficult for developers to securitize loans they provide buyers. Defaults on time-share loans climbed to 12% in March from 8% at the end of 2008, which has spooked lenders. This means developers lack cash to lend.Sales in the once recession-proof vacation-time-share sector have plummeted, and inventory has surged to new highs over the past six months. “It is a buying opportunity,” says Mark Lunt, principal of real estate and hospitality transaction advisory services at Ernst & Young. “People are demanding lower prices, and sales folks are slashing prices [by] double digits and offering incentives.”Time-shares allow buyers to lock in the cost of future vacations, which makes them appealing to budget-minded travelers, and they’re a less expensive alternative to buying a second home. Las Vegas, Hawaii and Orlando, Fla., have seen the biggest buildup in inventory and are therefore the places most susceptible to discounting.
By Janet Morrisey, April 30, 2009, Time Magazine

Link to article