123: 2026 Interest Rate Predictions & the "Vibe" Economy with BCREA Chief Economist Brendon Ogmundson

00:00:00 Taylor Atkinson
Welcome back to the number one rated podcast in Kelowna voted by Kelowna. Now we finally got our gold medal, Kelowna real estate podcast.


00:00:09 Matt Glen
Yes. We've done bronze, bronze, and then this year, home run gold medal.


00:00:15 Taylor Atkinson
Love it. I mean, it's funny, right? Like the Kelowna now voting, like you see a lot of social media, like people are always trying to get those votes and nominations. It kind of goes in like a couple, you do your nomination round and then the voting round. And it means a lot because it's kind of a pain to get through the voting. Like, you know, for somebody to vote for you, they actually have to do a bit of work. It's not just like click the button and they're done. Oh yeah. Yeah. Sincerely appreciate everyone that gave us a vote.


00:00:41 Matt Glen
Men. Yeah. Very awesome. Also, I feel like people in the podcast faces specifically like the media and like anyone that's public face here, like someone that's trying to have a presence. I feel like these awards kind of mean a bit more, you know, like they are tracking for something. So it's kind of means a lot.


00:00:56 Taylor Atkinson
Yeah. And I know like I'm not going for mortgage broker. You're not going to have free little kid agent. Like we just we don't really beat that drum for whatever reason. But you know what? We want to work together as a team on this podcast thing. And Nikki, our producer, has been like a huge reason why we've had so much success on it. But yeah, it's awesome. So thank you to all the listeners and the guests. Like we've had some incredible guests on this year. So yeah, hopefully we can keep it going, man. Hey, slogs, our hockey team won gold. Now we're winning gold in this. What's next?


00:01:23 Matt Glen
next? Man, we're on, well, gold comes in three. Wonder what gold next.


00:01:28 Taylor Atkinson
Yeah. Anyways, thanks. Appreciate it, guys. We'll try and, you know, keep up the high standard of good content. With that. Today we brought on one of our favorite returning guests. I think this is his fifth time on Brennan Augmentson, BCREA chief economist. The guy is awesome, like super charismatic, but tons of data, very analytical. Not a lot of economists can like, you know, educate people the way he does and like actually make it enjoyable and like you're on the edge of your seat. So hold an audience as an economist.


00:01:57 Matt Glen
an audience as an economist. I feel like that's not very popular, not a common thing. It's gotta be rare to be like that charismatic and also that sharp with the numbers. Like he's a great guest. That's why you have five times. We could honestly have him on every two months and never run on anything to say it.


00:02:13 Taylor Atkinson
I think we should just give him the show. Honestly, like let's tap out while we're on top and just let him roll with it. third gold just give it into brendan and be like here you go some of the takeaway i had obviously like everyone's asking the question like what are rates going to do are fixed rates going up down what's variable like what's bank of canada thinking especially with you know the war in iran his track record is like unbelievably accurate when you look back at our previous shows yeah He's been pretty spot on. So, you know, I don't want to like completely ruin it, but this show he kind of highlighted, hey, we have seen the bond market price in for increases in the rates. We've already seen that on the fixed rate side, and we'll likely see some of that on the variable rate side or prime. You know, Bank of Canada is kind of having a hard time doing that, obviously, because our GDP is just suffering, like our economy. sucks right now. So how do you increase rates that's going to kill the economy, but their mandate is obviously controlling inflation. So he talked a lot about that. We kind of broke down a lot of other things. The one thing I would say on that, choosing between fixed and variable, right now I still like the static variable payment, which allows clients to have the cheaper rate. Currently, variable is a cheaper rate than three or five year fixed. But if rates change, your payment doesn't change. It just changes the amount going towards principal. So more or less would go towards principal and your amortization would lengthen or shorten. So I do think it's one of the better products right now. I didn't like it kind of 2021 because rates were so low. that we knew they would come up substantially. And when they did, you know, amortizations were going out to like 50 or 60 years, or we'd get to this trigger rate scenario where banks would be kind of calling clients and saying, we need to adjust your payment.


00:03:52 Brendon Ogmundson
and saying, we need to adjust your payment. The other cool thing you could do,


00:03:54 Taylor Atkinson
other cool thing you could do, you could split it. Some lenders allow like a fixed and a variable. So you could do a mixed bag if you really want.


00:04:00 Matt Glen
if you really want. It's kind of a, it's an interesting time in the market.


00:04:03 Taylor Atkinson
Okay. Well, thanks again, guys, for the vote and enjoy the show.


00:04:10 Taylor Atkinson
All right, Brandon Ogdensen, thanks for coming back on the show. I think this is number five. Is it really? Or five? Yeah. So you are, you got to be our top returning guest for sure. I think for sure. And it's awesome. I've got that title with a few podcasts.


00:04:21 Brendon Ogmundson
got that title with a few podcasts. So happy to have put another one in my belt.


00:04:26 Matt Glen
Well, you're the rare and great that's extremely charismatic, but also knows all the numbers and information that those things don't usually. It just means I have nothing better to do.


00:04:32 Brendon Ogmundson
It just means I have nothing better to do. And I will just say, yes, man.


00:04:36 Taylor Atkinson
We could speak to you monthly and there'd be new information. You would think as an economist, like it shouldn't change that often. but like it's been a crazy few years hey yeah it's interesting like so i try and have only two like presentation decks like i'll do one for the first half of the year and one for the second by finding more and more i have to basically have like three three and a half like you know i make a lot more changes than i think i would like to to keep it fresh but from the start of this year there's been so much happening that we've been impossible to forecast i'm sure we'll get into interest rates and the iran war and everything else and the impacts but like it's a lot all the time yeah


00:04:44 Brendon Ogmundson
it's interesting like so i try and have only two like presentation decks like i'll do one for the first half of the year and one for the second by finding more and more i have to basically have like three three and a half like you know i make a lot more changes than i think i would like to to keep it fresh but from the start of this year there's been so much happening that we've been impossible to forecast i'm sure we'll get into interest rates and the iran war and everything else and the impacts but like it's a lot all the time yeah


00:05:11 Taylor Atkinson
Well, speaking about forecasting, I listened to a bit of our show with you a year ago and you were bang on. So was I a year ago? We were right in the thick of tariff announcement. I don't think it actually everything was finalized yet, but we were discussing that and the impacts of it. And so we kind of said, hey, like crystal ball, how does that look? You said, well, you know, prime should probably drop by 100 basis points and bring it down to like 4 .2. So right now it's at 4 .45. So very, very close. You said GDP would. likely struggle. Inflation would probably come up a little bit and fixed rates will likely come up a little bit. So you got everything other than the war in Iran. Could you not predict that? Come on.


00:05:50 Brendon Ogmundson
No, I know. I know. Well, even like my forecast on sales, we were more optimistic, I think, for 2026. I thought we would have a better start to the year. Most markets have started out really slow. Some of it's just like, you know, after this long, there's so much pent up demand. affordability is actually improved in a lot of places. You'd think that eventually we'd get some of that demand off the sidelines. But a lot of what I've been doing in my presentations is like, here are all of like the accumulation of shocks that have hit the market over the past few years. And like, it's just taken a long time to kind of dig out from under all of those shocks.


00:06:24 Taylor Atkinson
Yeah. Well, can we maybe talk about like those transactions, that kind of data right now? Because for me, it has felt like a slower start this year. I know last year, beginning of 2025 was. absolutely bumping. And then tariff announcement came out and it just like killed everything. And then it kind of, you know, things normalized, I would say, kind of in the fall. But yeah, it definitely feels like a bit of a slower start to 2026.


00:06:45 Brendon Ogmundson
Yeah, you can see it in the data for the Okanagan. The end of 2024, start of 2025 was really strong. Tariff stuff starts, all that uncertainty hit. Sales immediately fell to about 20 % below the 10 -year average where they stayed and then tried to mount a comeback through the summer of last year. Sales picked up and then ended the year pretty weak and started. of the year really weak there's nothing to really point to right there's no real change like you know between the end of last year and the start of this year nothing to really like oh that's the obvious catalyst for why sales are so much weaker they just were i've got a whole bunch of theories about vibes that we can talk about but like there's like macro factors and you're going to get exhaust the list of things like prices are flat to slightly down like at the time at least before the iran war up this year Rates had actually been coming down. The five -year yield had fallen as low as 2 .6 we were about to get. You know, fixed mortgage rate, there's like close to 4%. And then, you know, events transpired for that not to be the case. But if you just look like macro factors, there wasn't a lot to point to for why we had to start in such a weak year. Maybe looking back now, like I put a chart up on LinkedIn. yesterday or the day before Tracy and private sector employment. Well, since the peak, when private sector employment peaked in 2025, so in September 2025 versus past recessions, I've got this like, Kind of growing concern that the BC economy might be tipping into a recession, not Canada, but the province. Private sector employment, since it peaked, is at its weakest level or is on its worst path, I guess you'd say, since the 1981 recession, not counting COVID, which was a very sharp drop. But we've lost 80 ,000 private sector jobs this year. That's pretty startling. That puts us on par in terms of percentage loss with 1981 or the financial crisis. It's really. Is public sector jobs increasing? Slightly. Just very, very slightly. Their plan is to decrease payrolls through like attrition, but not really seeing it much lately. Some of that public private sector stuff gets a little bit muddy too, because like teachers, doctors, nurses are public sector. So like I prefer to look at if I'm thinking just like pure government bloat, there is a category and like the industry category is called public administration. And that's like pure like. bureaucracy. That's where we've seen just a ton of growth without, I would think most people would argue, any improvement in government services. There's a lot more people. Obviously, we need teachers. We need more people working in healthcare. Obviously, we're going to keep adding people in healthcare. Hopefully, more frontline healthcare than middle management, health authority kind of jobs. But frontline healthcare workers, certainly. We need way more of those, their population ages and everything else. Things you guys know about the Okanagan, given your demographics.


00:09:27 Taylor Atkinson
Yeah, we're struggling with those services here for sure. Do you know then geographically, like for private sector, I'm just assuming like Kelowna, is it predominantly like, is that where we're seeing our job loss? Because we are seeing like a fairly large increase in unemployment.


00:09:42 Brendon Ogmundson
I don't know. The data at like the CMA level, so like Kelowna, like big city kind of level, is pretty noisy. It's usually smooth by three months. I don't trust it that much. It's just really noisy. So it's hard to say geographically. We try and track. like we have our now cast where we track economic growth in the province and we have these regional ones hard to benchmark those because there's no like real gdp number for the okanagan but we try and track growth and the okanagan's been a little bit more resilient than like the rest of the province it's actually growing a little bit faster some of that's demographics too like the okanagan's kind of odd and that it has kind of bimodal kind of age cohorts we have a lot of retirees but also like a lot of young people like when i was in kelowna Last week, like everywhere you look, it's just like very young, very fit people. You guys are a fit culture. It's like, wow, everyone here is in great shape. And then there's also like, you've got like the older demographics or I don't know, golfing and do whatever they do. But yeah, it's a really interesting area for that. And that has like unique consequences for housing too. Cause you've got a lot of young people that probably would like housing a lot of. older retirees coming in with you know their large savings and that puts like weird pressure on the housing stock so it's an interesting dilemma i think in that market yeah there's a huge wedge between it seems like a surplus of condos that have been coming online to you know like people want that larger single family home but there's kind of nothing in between like the townhouse market there's some room for growth there but the cost miss your middle like it's so weird like in markets like


00:10:58 Taylor Atkinson
there's a huge wedge between it seems like a surplus of condos that have been coming online to you know like people want that larger single family home but there's kind of nothing in between like the townhouse market there's some room for growth there but the


00:11:12 Brendon Ogmundson
miss your middle like it's so weird like in markets like like colonna which is you know a growing city in bc you'd think that we wouldn't keep repeating the exact same mistakes like there is a template not follow that like the lower mainland has where it's like oh let's not build any missing middle housing let's just have like single family homes that are too large or very very small condos and nothing in between yeah i don't know why cities keep doing this as they grow like they don't realize hey maybe we should have like some quasi affordable multi -bedroom kind of product they just Maybe it doesn't make sense to build. I don't know what it is, but it always gets overlooked.


00:11:49 Matt Glen
I know. It's like, do they even build three -bedroom, two -bathroom houses that are 2 ,000, 2 ,500 square feet anywhere? They just don't exist.


00:11:55 Brendon Ogmundson
You think, right? I remember one of my first places we lived in was an 1 ,800 -square -foot, I think, three -bedroom townhouse. It was perfect. It had a little bit of a backyard. I don't understand why there's not more of that. And it was on two levels. It wasn't like those like really skinny, like three level townhouses. It was the perfect size and perfect layout. And they just don't really do that.


00:12:16 Taylor Atkinson
Yeah. Yeah. Especially from the mortgage side, like most applications come in and you're like, yeah, you're approved for that between like 800 and 900 ,000. And they're like, right. I can't find a home for that, but I can find a condo at 700. I don't want a condo. I want a home for a million, but I can't like, it's just this weird. Yeah.


00:12:33 Brendon Ogmundson
I know. That's why it's called the missing middle. Cause it's missing.


00:12:37 Taylor Atkinson
Yeah. Yeah. I get this question all the time right now, you know, always have historically, obviously people look for this since you did such a good job predicting last time, maybe we can bring out your crystal ball again, variable fixed rates. You know, people are deciding which direction to go. Obviously there's a lot of caveats to that. What kind of amortization, if it's insured, not rental, whatever. But I guess where are we thinking in the next six to 12 months, you know, prime is going and where are we thinking the bond market fixed rates are going?


00:13:06 Brendon Ogmundson
Yeah. So I'll start at the beginning of the year. So what I was thinking, and then we'll, they'll kind of inform how I think the rest of the year is going to go. So. Start of the year, we were seeing inflation come down a little faster than expected. So I like to watch core inflation, but more specifically, the three -month annualized rate of core inflation, because it gives you a sense of like, what's the underlying momentum? So if it's slower than like the 12 -month, you can expect that inflation is going to start to come down. And what we were seeing in those three -month core measures was inflation running at like 1%. like really decelerating. Like 12 -month core was still kind of around, you know, between two and three, but like it was slowing down fast. Now that's why you have core inflation on a 12 -month basis back to about 2 % as of last reading April. So inflation was coming down. We have a job market that's pretty weak. So not just in BC where in total have lost jobs in four of the past five months, but 60 ,000 private sector jobs. Across Canada, we've lost 80 ,000 jobs in February alone, over 100 ,000 jobs this year. So a really weak labor market inflation that was decelerating. So in my mind, that was a Bank of Canada that would at the very least be leaving rates unchanged and maybe would have to start thinking about lowering rates below. Like they're at the bottom end where they think it's neutral for the economy right now at two and a quarter. Maybe they'd have to go to two or one seven five. Then, of course, the United States starts dropping bombs on Iran and the Strait of Hormuz closes and we have oil prices spike above $110. When we fad through like what the oil futures curve looked like after those events into our models. tells us while inflation's probably going to spike to above three percent there's two eight most recent reading headline inflation the impacts on gdp so we're an oil exporting country but this is a supply shock so it all really does is increase prices there's no new demand this isn't something where oil companies see like oh prices are rising there's so much demand let's invest more let's hire more it's really just a windfall for producers and more and more those producers are located outside of canada like the owners are outside of canada so we don't necessarily get all the So there's a mild positive impact to growth, but that gets overwhelmed pretty quickly by the effect of everyone on this call going to the gas pump. And it's 230 a liter where I am. And when I was in Kelowna, I think it was over $2. So that hurts. That hurts consumption. And those effects start to outweigh. So you get this sort of sagflationary effect where growth is a little bit lower than it would be otherwise. And inflation is a lot higher. The real question then is what does the Bank of Canada do in that scenario?


00:15:35 Matt Glen
is what does the Bank of Canada do


00:15:37 Brendon Ogmundson
in that scenario? In a model, it's very simple. There's a real bias towards fighting inflation in all macro models. So our little computer version of Tiff Macklem raises rates back to 275 in the model to quell inflation,


00:15:49 Matt Glen
to quell inflation, which eventually comes down.


00:15:51 Brendon Ogmundson
In reality, I think that's a lot more nuanced. There was a deputy governor of the Bank of Canada, Sharon Kozicki, brilliant, brilliant economist, unfortunately retiring because they're losing one of the best people. But she had this great speech right before all this kicked off about how central banks should respond to supply shocks like this. And it's really kind of a simple, intuitive framework. If it's a really big shock that's really persistent, then they probably have to act more aggressively. And if it's a small shock, they can probably look past it. This, unfortunately, is a really, really big shock. It's 20 % of oil production that goes through the straight. By most measures, this is the largest oil supply shock since the 70s. And then the other question then is, is it persistent? Is this going to last a long time? Can the bank account look through this? doesn't seem to be ending anytime soon from like oil experts i have read and listened to like this is a pretty pivotal month for oil inventories i guess a lot of production has been coming out of inventories but those inventories are depleting rapidly so we could see oil prices really jump if we don't get some resolution soon you know price have been basically held in check by just using inventories so the inflationary effects and like the lingering impacts of the longer this goes You know, if you're, say you own a trucking company and your costs are going up a lot when you bring a produce to a grocery store or whatever. you could probably you know eat those costs for a month or two not pass them on to stores but you've only done for so long and eventually those prices are get passed on then they get passed on you know from a grocery store and consumer prices then you get this sort of spiral where oil prices start driving all consumer prices higher and then people see prices at the grocery store and the gas pump and everywhere else rising they ask their employer like a bigger wage increase this year you just get this really difficult spiral that then the bank has to be really aggressive to try and break and we saw this this is exactly what happened during covet and so the question with the bank of canada is they were pretty roundly criticized for acting too late or in coba they you know waited about a year to start raising rates when inflation was very clearly rising that's pretty fresh in their minds maybe they want to add some credibility back by being more aggressive this time around and raising rates in the united states which is also super important for what happens to bond yields here the fed has gone from you know an assumption by markets that they were going to be cutting rates once kevin warsh came in he was sworn in today to now expecting that they might actually have to raise rates so all of that you know means like even if the bank of canada isn't going to raise rates this year even if they keep rates level we've seen five -year bond yields jump significantly and they touched like 3 .4 this week come down since but because of expectations that central bankers in both the us and canada might have to raise rates to fight this inflation so a lot of what's in the five -year bond yield right now is pure expectations about monetary policies like you can kind of look at any bond yield and break it into two parts one is what do markets expect you know the central bank's going to do and the other part is like a risk premium and so part of what we've seen is higher risk And that's about, I think, 20, 30 basis points for the Bank of Canada's data. And a big part of it, though, is just expectations that banks have to raise rates. So super long -winded answer to your question. And it's like, essentially, I don't know. I don't think the Bank of Canada will raise rates because the labor market is really weak and the economy is a little bit weaker than I think GDP growth is gestating. But it kind of doesn't matter, right? because five -year fixed rates are already rising significantly just because of expectations. This whole choice between a variable and a fixed, then fixed rates could come down if this gets settled tomorrow and all that expectations for rising rates gets pulled out of bond yields and we're back to where we're pre -war. But if you take a variable rate, you're also risking that markets are right and the Bank of Canada is going to raise rates at least twice this year. So that's why a lot of people are taking a three year lately because like it's still a pretty decent rate and you can kind of bypass all this uncertainty.


00:19:55 Taylor Atkinson
Yeah. I mean, we've been doing three years for like five years now. It just seems like the best product for the most part. So something you said at the beginning there. So it seems like inflation kind of supersedes GDP in terms of like what Bank of Canada is focusing on because they're in such a difficult position, right? It's like the economy sucks. So you have to lower the rates. But if inflation. you know, starts to run away again. Like it doesn't matter what our economy is doing. Like inflation is just going to level anyone.


00:20:21 Brendon Ogmundson
Yeah. Ultimately their mandate is to keep inflation at 2 % of the medium term. That's their reason to exist. So they're always going to have a bias towards controlling inflation.


00:20:31 Matt Glen
yeah is there any hope that alberta gets a boom and that money comes to us like even in the long run that's like you know the only region that might benefit from this right i guess maybe bc because of lng if lng prices also rise but even then like those are mostly foreign -owned companies i think so again it's really just kind of a windfall profit windfall and the bank of canada released a really good study i think it's the bank of canada not too long ago about


00:20:36 Brendon Ogmundson
know the only region that might benefit from this right i guess maybe bc because of lng if lng prices also rise but even then like those are mostly foreign -owned companies i think so again it's really just kind of a windfall profit windfall and the bank of canada released a really good study i think it's the bank of canada not too long ago about The change in ownership in oil companies in Canada, like how much more of it's consolidated in the United States than in Canada. So we don't necessarily get like the positive benefits of like those windfall profits.


00:21:09 Matt Glen
Perfect. So if the Strait of Hormuzes is closed indefinitely, which is honestly kind of hard to see how it opens anytime soon, there won't be a pressure on Alberta or Canada to start producing more oil to fill that void. Because right now we're just using reserves, right? We're using strategic reserves to kind of level this out. I guess like if you could,


00:21:24 Brendon Ogmundson
like if you could, but again, like this isn't demand driven. so if you say you're a large oil company you're planning for the future are you going to invest a whole bunch in hiring and new you know trucks and everything else for something that's a temporary shock to home prices that's a hope to the oil community right like then what then you know this gets settled the oil prices come back down there's not any new demand and now you have all this kind of surplus that you've invested in you gotta yeah so yeah that's why like a supply shock is a lot different than if this was being driven by you know global economy was on fire and everything was growing really fast and that was driving more and more demand for petrochemical products but like that's not what this is this is just a pure supply shock and in terms of price at the pump can you tell me if i'm crazy here because like i understand the volatility obviously with war you know ceasefire trump's tweeting but like i feel on a thursday


00:22:04 Taylor Atkinson
terms of price at the pump can you tell me if i'm crazy here because like i understand the volatility obviously with war you know ceasefire trump's tweeting but like i feel on a thursday you know it's two bucks a liter two days later it's a buck sixty two days later it's two bucks like there's like 40 cent swings every three day why yeah i don't know i'm not super dialed in on the economics of individual gas stations but like i remember reading there's a real good paper it takes like i remember what it is like six weeks or something for the price of oil to transmit to the price of the pump or something and there's like


00:22:23 Brendon Ogmundson
i don't know i'm not super dialed in on the economics of individual gas stations but like i remember reading there's a real good paper it takes like i remember what it is like six weeks or something for the price of oil to transmit to the price of the pump or something and there's like refineries you know sometimes refineries are down and like there's all there's so many different factors i remember trying to explain this to like in -laws and stuff at some point but it's always just like it's easier to be like oh they're all just colluding they're all like that's that's always like everyone always has their pet theory about gas stations and like no amount of like economics has ever convinced them otherwise so yeah believe what you want to believe you're going to be paying it regardless of what your own theory is


00:23:06 Taylor Atkinson
Yeah. And then in terms of kind of, does this obviously affect cost of housing with inflation? Yes. But like, where does it go for like supply and demand of housing? Like where are we at now with obviously, you know, a year ago, two years ago when we had you on previously, it was like, we need a substantial amount of units to drive, you know, housing to that affordability marker, whether that's, you know, the war or not including the war. Like how are we looking in terms of housing now for a forecast?


00:23:34 Brendon Ogmundson
Yeah. So one more. one more shock right like we think about the accumulated effects like first we had inflation and then massive rapidly rise to interest rates then we got uncertainty and tariff shocks now we have this iran war shock that is driving mortgage rates higher so it obviously hurts demand in the short run at a time when demand is already very very weak so this is just one more thing that might kind of stifle a recovery this year so it's mostly on the demand side on supplies that just means we get you know higher levels of active listings because things stay in the market longer when we look at like resale listings in the okanagan most of the rest of the province nothing too alarming like we're up a lot


00:24:07 Matt Glen
we look at


00:24:07 Brendon Ogmundson
like resale listings in the okanagan most of the rest of the province nothing too alarming like we're up a lot but we're up from like look at the past decade we had like crisis low levels of inventory that led to prices spiraling much much higher so where we're at with inventory right now is actually kind of where i would like inventory to be all the time to keep markets in balance so i'm not super concerned on the inventory side i'm more like we need demand to pick up and then you know make sure that we're resupplying the housing market enough and that's where the real my biggest concern is is that we're setting ourselves up for two three years from now Demand is kind of back to normal. And because of all of the like regulatory policy, taxes, everything else that we're doing to kind of stifle development, we're not going to have enough supply and we're going to get this sort of reigniting prices again. A lot of what's going on right now is there's just so much unsold inventory. Not so much in Kelowna, but in the province, we were at the highest level since like 1995. And we wrote a report about it, you know, kind of the risk of like replaying the 2010s. Were either of you in the market like post -financial crisis?


00:25:19 Taylor Atkinson
I bought my first place in 2008. Literally the worst time you could buy. Good timing.


00:25:23 Brendon Ogmundson
timing. 2012. Okay. Better timing. So you recall like this is a real thing in the Okanagan like building was going crazy in Kelowna right before the financial crisis and then demand fell out and there was an overhang of inventory that lasted a really long time. and kept prices flat till like 2014 or so. And then demand started to come back for a number of different reasons and prices shot up. In Kelowna, I think for 2015 to 2019, prices went up like 50 % or something. I'm really worried about that happening again. We have all this inventory, especially in the lower mainland. There's about 6 ,000 units completed and unsold, which means two things. Developers aren't going to build if they can't sell what they've already completed. That means much slower housing starts down the road. Yeah, that means like is the sort of air pocket open up for when demand comes back and then prices will accelerate. Cologne is really interesting in that inventory spiked at the end of 2025. It was at the highest level since the 90s. And then immediately came back down in like February. And I think I heard some people say the units that were for sale that were supposed to be short -term rental. And then once the vacancy rate was high enough that Kelowna could opt out of the short -term rental restrictions, that they just all got pulled and they're going to be short -term rental again. That would explain the weird spike and then fall in inventory. I don't think anyone came and bought three or 400 units of condos in Kelowna in two months. So maybe that's what's going on. It's kind of strange. Or it's just weirdness in CMHC's data.


00:26:54 Taylor Atkinson
I feel like we have been, I mean, I say we, like Matt and I have been beating this drum for the last couple of years of like, this is kind of the low in the market. Like there is an opportunity here to maybe buy. And like in a few years, like it's got to pick up because there is that supply and demand, like just to go back to basics. But I also now feel like I'm starting to get like a little repetitive. I guess if you had cash to deploy, are you looking to buy as an investment in real estate? Like takeaway, you know, policy and volatility of like, you know. restrictions on that if i was it would certainly be in either the fraser valley or the okanagan simply because those are the markets that been the kind of the most beat up over the last three years or so so like there's a lot of pent -up demand there's just sales just way below their 10 -year average and those sales tend to revert back to average


00:27:24 Brendon Ogmundson
if i was it would certainly be in either the fraser valley or the okanagan simply because those are the markets that been the kind of the most beat up over the last three years or so so like there's a lot of pent -up demand there's just sales just way below their 10 -year average and those sales tend to revert back to average And the Okanagan, it's like 30 % of the population in the Okanagan is between 25 and 44. In the Fraser Valley, it's like 32%, maybe not 44, so maybe not young. No shitty, you guys. I'm almost 47. I'm definitely not young.


00:27:54 Taylor Atkinson
I'm almost 47. I'm definitely not young.


00:27:56 Brendon Ogmundson
I just heard 40. That is the age group where you tend to have either first -time homebuyers or move -off buyers, right? There's a lot of buying activity that happens in that exact age cohort. And there's a lot of those people in the Okanagan and the Fraser Valley, you know. Fraser Valley's got some other kind of benefits, like Surrey's growing even faster than Kelowna. It's going to get rapid transit in the next five years. They're really bad at supplying the market with housing. They only build about 4 ,000 units of housing a year. So those are the markets where I would expect when things come back, they're going to come back in a big way.


00:28:29 Matt Glen
I guess the difference in this market is we also had, because of the CMHU financing, building the purpose -built rentals, we've had like a glut in rentals. Like you can say that the values of the properties are like at the bottom, probably going up from here, but they're still not even close to cashflow because of the rental. Yeah, you're kind of buying for appreciation instead of. Yeah, so like how many people can just buy a $700 ,000 condo and wait for it to appreciate with negative cashflow? So it's just, it's a tough ask for buyers.


00:28:56 Brendon Ogmundson
I think that's a big part of what's going on on the demand side, too, is we've effectively chased away investors, right? There's just so many things that you can't do with your own property at this point without incurring some kind of penalty. Plus, on top of that, at least this is temporary. On the demand side, we have a federal immigration policy that is essentially sending... renters out of the country the federal government between 2025 and 26 wants to dramatically lower the share of non -permanent residents international students and temporary foreign workers mostly by like 900 000 people over two years in bc last year we saw a reduction of 80 000 non -permanent residents which led to our first contraction in our population i think since confederation canadian level and in bc as well So really abnormal to have negative population growth in Canada. And 99 % of non -permanent residents are renters. So we sent potentially 80 ,000 renters because they're usually like, you know, students and temporary foreign workers are usually like one person households. So we sent like 80 ,000 renters out of the country. At the same time as we're completing more purpose -built rental than any time in decades. That's so interesting. No jock that Colin's vacancy rate is like 6 % and going higher.


00:30:09 Matt Glen
so interesting.


00:30:13 Matt Glen
Matt, so is there going to be like in a... I guess the short to medium term, do you expect that to change? So 2025 and 26 is the massive outflows.


00:30:18 Brendon Ogmundson
2025 and 26 is the massive outflows.


00:30:21 Matt Glen
Yeah.


00:30:21 Brendon Ogmundson
And then they're going to allow like a trickle of positive inflow of non -permanent residents in 2027. And it gets back to like normal in 2028. So we'll kind of stop, you know. hitting ourselves in the head in 2026 essentially and but it's going to take a while for population growth to recover but then again when it does all of a sudden we have one more thing normalizing demand and maybe we'll be well supplied on the rental side of things but you got to think like we're building so much purpose -built rental yeah what does this mean for the housing market like 10 years from now We have a scarcity of ownership product. Do a lot of those purpose built rentals get converted to strata at some point? Like we saw that I think in the 90s. I can't see us having this much rental long term. We built so much and CMHC is finance like 85 % of it. It's the only way to make it pencil.


00:31:12 Taylor Atkinson
to make


00:31:12 Brendon Ogmundson
it pencil.


00:31:13 Taylor Atkinson
We actually had a developer do the opposite where it was built for stratification to sell. Yeah. And then they converted it and this was recent to purpose built rental.


00:31:19 Brendon Ogmundson
Yeah. And


00:31:22 Brendon Ogmundson
Yeah. That's happening a lot. That's happening a lot. If you've got a development that's well underway and they can't hit their pre -sale marks, we've seen a lot of those then pivot towards purposeful rental because they can get all the incentive financing and 50 -year amortizations and everything else.


00:31:39 Matt Glen
Yeah. Okay, Brendan, I have to ask you. Yeah. Totally changed gears. So how has the Cowichan ruling affected us? Is it just vibes or is it having a real effect here? Totally speak on the economic side.


00:31:49 Brendon Ogmundson
speak on the economic side. There's no sign in the data. that it's had any okay the one place where it could be making a difference and even then hard to say it's just like uncertainty right there's just one more piece of uncertainty and even then like i don't know how strong the data is even if you look at the different issue but like the drip up stuff and it's the fact on business investment the bc business council surveyed their members who you know there might be some bias in their sample but like 75 percent of people in that survey said they were going to hold back on investing and hiring because of the uncertainty caused by Drifa. So way out of my kind of normal jurisdiction, but like in the one way it might be affecting things like the bedrock of capitalism is certainty about property rights. Anything that clouds that certainty, even a little bit is probably not helpful.


00:32:37 Matt Glen
I agree with you and on this podcast and just in my day -to -day life, it feels like everybody is saying like, oh, this capital is pulled out. These people aren't investing. It just seems anecdotal to me. And I saw you post it lately about vibes and I was like, man, this is a vibe issue.


00:32:51 Brendon Ogmundson
It might be. So I love talking about this issue. It's funny because like I'm a pretty quantitative person and vibe sounds like more kind of squishy and about feelings, but I have made it. I've made it. I've made feelings in the numbers.


00:33:06 Matt Glen
Your wife must love that. Yeah.


00:33:09 Brendon Ogmundson
So like there's a few things going on, like probably the most popular chart I've made maybe ever that I put on LinkedIn and my show in speaking engagements is this chart that I called, why is everyone so mad all the time in one chart? And it compares wage growth since 2021 with shelter prices, so rent or ownership housing and food. And so wages have gone up 20 % since 2021, but food and shelter have gone up 30%. So you've got, you know, all of your clients will be dealing with this all the time, right? Like you're talking to them about buying a house or whatever. And every time they go to the grocery store, everything's more expensive. Now everything they go to the gas station, it's more expensive. And their rent is increasing. Their paycheck's growing, but they're not getting ahead on like. basic items and i think that's like the underlying economic anxiety for a lot of this it's just the price level went up a lot even though inflation's back under control things are still really expensive that just kind of weighs on people so is that and then i was looking for something besides like you know i probably talked about the economic policy uncertainty index any economist in the past two years has just shown that chart eight million times with uncertainty flying off the axes but it just doesn't explain that much So it's like, well, what else is going on? So I found a bunch of data. The Bank of Canada does a survey of consumer expectations. So they ask people things like, what's the probability you're going to lose your job in the next 12 months? And that's at like 20 % right now. The only time it's ever been higher was during the first quarter of last year, during the tariff uncertainty. But it's still almost at that same level. So right now, a fifth of Canadians think there's a 20 % chance they might lose their job this year. you don't go and buy a house right and who knows what that is maybe that's still tariff uncertainty maybe it's ai who knows what that is but it's a real thing and then also that survey is like asking about how they rate their financial health what their plans kind of consumer spending over the next year how do they rate the labor market so basically i took the policy uncertainty index and a bunch of that bank of canada survey data And I performed like a statistical procedure on it to extract a trend. And I just call that vibes because I'm not a very serious person. But it does correlate really well with home sales. It explains about 25 % of home sales over the past 10 years. And if vibes got real bad at the same time that home sales really, really fell off. So maybe there's something to that, but like, you know, it is based in like, how are people feeling? And they're not feeling right about the prospects for the economy or their own kind of financial situation. It's funny if you compare it, there's this Arthur Okun, who's a really famous economist from I think the 60s, coined this really elegant kind of definition of misery, misery index. Misery equals inflation plus the unemployment rate. So like if you don't have a job and prices are rising, it's a pretty good recipe for misery. Our vibes index correlates really well with the misery index, except for like 2024. So whatever we're getting in vibes is not necessarily just the economy or not that kind of summary of the economy. There's something else going on. Is it the overall price level? Is it housing affordability? Is it Trump? It's something that's not in the economic data currently is affecting people. And I'm sure you guys see this all the time talking to clients. Like there's not feeling great about the state of the economy, the state of the world. Who knows?


00:36:31 Taylor Atkinson
Yeah. The trend of that. kind of diversion seems to just be continuing, right? Like everyone's like, oh yeah, 50 years ago when my parents bought their first place, the income was this and the purchase price was this. Like, yeah, it was easy. And now we're just continuing that trend. So like in 50 years from now, we're going to be like, oh yeah, it was easy. You know, my parents bought their first house for a million dollars and made a hundred grand and now the house is $10 million. Like what is the solution? Like, does it just go like this? Definitely.


00:36:59 Brendon Ogmundson
There is something to that too, where like every generation thinks that they've had it the worst. It's funny, like one of my other decks, a chart of mortgage rates for every generation going back to like silent generation or whatever. So like, what was the mortgage rate during their peak home buying years?


00:37:13 Matt Glen
And I always have this joke that like,


00:37:13 Brendon Ogmundson
always have this joke that like, if you mention mortgage rates to anyone over 60, they're almost like legally obligated to tell you that their first mortgage rate was 20%. Yeah. Yeah.


00:37:25 Brendon Ogmundson
It's immediate. Yeah. But it's true. If you had a mortgage of 20%, wouldn't you tell everyone that ever brought it up? Because it is kind of startling that it was ever that high.


00:37:35 Taylor Atkinson
Yeah. It's like a feather in their cap. Oh,


00:37:37 Brendon Ogmundson
yeah. Look what I went through. Congratulations. I fought in the mortgage wars of the earliest days. But yeah, this generation does have it kind of tough because it's the first generation to really have mortgage rates that have been rising. Obviously, they're volatile, but this is the first generation. If you're a gen. whatever it is, if you're a millennial or Gen Z, like, you know, mortgage rates have actually gone up over the past couple of years. And not only that, you have to qualify with a stress test. It didn't impact people in the 2000s and the 90s. Like, it's more difficult to qualify and then actuated into this job market. It's one of the worst job markets I've seen. The employment rate for people aged 20 to 24 is at its lowest levels, like, I don't know, ever BC. Anyway, it's really low. Yeah. So you could make an argument, I guess, for like this current generation, like if you're in your 20s and also like I give this example all the time, the effect of AI. Imagine if you're a high school student who worked super hard, all through high school, incredible grades, maybe got into like Waterloo computer science or something. Yeah. You're in your third year. You're thinking like, oh, when I graduate, my choice of $200 ,000 a year software engineering job. And now those are gone. i'm the top coder in my class right and like what do you do what do you do it's a really really difficult time for young people i don't have any answers for them the computer one is like kind of just the tip of the iceberg like it's going to be like anyone right coming up so it's like that are the first ones that are the obvious ones but like


00:39:04 Matt Glen
computer one is like kind of just the tip of the iceberg like it's going to be like anyone right coming up so it's like that are the first ones that are the obvious ones but like Even like lawyers, I feel like.


00:39:14 Brendon Ogmundson
If AI learns to podcast, I don't know, you guys. Yeah.


00:39:17 Taylor Atkinson
Yeah. We're out of a very, uh, unproperly. There is a very lucrative sideline. Yeah. Yeah. We're definitely making money here.


00:39:25 Matt Glen
AI takes over our podcast. Taylor and I are actually going to make more money, which is actually. Right.


00:39:29 Brendon Ogmundson
Yeah, absolutely. The productivity will skyrocket. Yeah, exactly. Yeah.


00:39:34 Taylor Atkinson
Before we let you go, can I ask a couple of questions from a friend? Let's say this friend, like we were talking about the condo market in Kelowna, bought a couple of condos in the previous three years. So kind of in the peak for condo prices. And now you're looking at these prices like, wow, like even as a broker, I'm now getting appraisals back that are like. you know, the purchase price was 670 and now the appraisal is at 500. And you're like, wow, someone should like dollar cost average. If you made a couple purchases, you know, three, four years ago, you could argue that these are some pretty low prices, like to kind of level out that portfolio. Maybe now's a good time to buy. Or would you say, you know what, that asset class is still saturated for the next few years. It's not going to cashflow. I would kind of lean to like buying some affordable ish single family homes because, you know, if we're about i think you said like 20 to 45 year olds you know like first time home buyer is that an asset class that is obviously builders aren't building the cost to build is too expensive the land acquisition like yeah what would you advise this friend do that's a great question because like as an investment too i'm not super bullish on price appreciation except there is that risk that we're in this air pocket and we find ourselves undersupplied 2028 29.


00:40:35 Brendon Ogmundson
a great question because like as an investment too i'm not super bullish on price appreciation except there is that risk that we're in this air pocket and we find ourselves undersupplied 2028 29. Maybe not in Kelowna so much as in like the lower mainland, but still like you guys have to have those population pressures too. If it was just like over the next three years, I don't think you're going to get very much at all on price appreciation. Rents because of immigration policy and how much purposeful rental is being built are also going to be kind of suppressed. So it's not a great return. So you're really like banking on basically like the total failure of our ability to supply the market over the next decade, which is probably a pretty safe bet. Right? Because that's what we've done for the previous 30 years on the ownership side. And so, like, how long is your window? Like, you might have five years where you might as well just put in a term deposit versus, you know, the hassle, especially of being a landlord, which is also no picnic in BC. And this is why we're seeing so much capital go into Alberta markets, because... still relatively affordable to get in there's still room for price appreciation and the rents are falling as much so like the returns in those markets are much higher than most markets in bc so i think for investors just because of the way policies lined up against investors and what's going on on the supply and demand side of rental as we are really tough market segment for two three years but you're kind of banking on it you're going to hold it for a really long time either you're going to be able to use them a short -term rental and then maybe their cash flow is better or you're going to get you know, higher than sort of like a risk -free rate returns after 10 years because we bungle our supply targets and prices start to rise, you know, much faster than inflation.


00:42:19 Taylor Atkinson
Okay. Awesome. Are you the friend or?


00:42:20 Brendon Ogmundson
you the friend or? No, was it that transparent? Yeah.


00:42:24 Taylor Atkinson
I mean, I picked up a condo that was short -term rental a few years ago. That's absolutely getting crushed and then closing on another one soon, which obviously, yeah, the pre -purchase contract. It'd be interesting to run the numbers together.


00:42:34 Matt Glen
be interesting to run the numbers together. See, like you just take the L on the condo and. buy something else for the next five years, you know, like.


00:42:41 Brendon Ogmundson
Yeah, it's hard. Like I'm doing a thing this weekend for first time home buyers and like trying to like, because it is like home ownership is still, there's like lots of reasons why it's a really good idea, you know, for savings, leverage, wealth building. Like if you look at the data, you know, homeowners have multiple times the wealth by age 65, that right interesting. And there's a bunch of reasons for the next few years, like. you know if you're worried you're waiting for rates to come down or you're waiting for prices to come down that i just don't think that's going to happen i guess that's a different thing though than like should i be an investor in a condo it's a different question than should i buy them or just rent as my personal residence


00:43:18 Taylor Atkinson
Yeah, I think as a first -time homebuyer, like in the last couple of years, honestly, it's been better to rent. However, with all the incentives of, you know, first home savings account, GST, rebate, property transfer tax exclusion, like there are a ton of stuff that is like, okay, it is pretty advantageous now as a first -time homebuyer to get into that market. So yeah, you know, as much as we hate it, they have done some policy changes that kind of force people into that.


00:43:42 Matt Glen
but like real estate's also like especially your home is a long -term investment like you're not like okay now's a better time to rent i'm going to sell on rent for two years then i'm going to buy again like that's just how it works right so you know that's my other thing is like don't try and time yeah that's crazy to do that ever like it's just it's not going to work it's not going to work out for you yeah but you're right with the investor thing it's a different hat but i agree if you're going to buy the house buy the house if it works for you you know like yeah for sure yeah so that's good advice


00:43:51 Brendon Ogmundson
that's my other thing is like don't try and time yeah that's


00:43:54 Matt Glen
crazy to do that ever


00:43:56 Brendon Ogmundson
like it's just it's not going to work it's not going to work out for you yeah


00:43:59 Matt Glen
but you're right with the investor thing it's a different hat but i agree if you're going to buy the house buy the house if it works for you you know like yeah for sure yeah so that's good advice


00:44:08 Taylor Atkinson
Awesome. Well, honestly, yeah, we obviously love having you on. It went so fast, I feel like I didn't actually answer a single question,


00:44:12 Brendon Ogmundson
fast, I feel like I didn't actually answer a single question, but I mean, I haven't come back any time and I answer actual questions.


00:44:18 Taylor Atkinson
That is what makes a good host, you know? You just feel like you haven't talked about anything. Yeah, well, appreciate you coming on and we'll obviously keep track on all your charts on LinkedIn and stuff. Yeah,


00:44:29 Matt Glen
thanks a lot, Brandon. It was awesome.


00:44:30 Brendon Ogmundson
Anytime you need me, just send up the bat signal, I'll show up. I got nothing else going on. Yeah.


00:44:38 Matt Glen
Okay. Take it easy. All right. Yeah. Thanks a lot.