So if you were grading the Fed right now, would you give them an A for sort of orchestrating this? Or do you think this was sort of other factors at hand and it would have happened no matter what the Fed did? Well,

I think there are a lot of factors at play. But one thing I think that the Fed did really well was how quickly they raised rates. In this modern economy, with all the information technology that we've got and the advancements that we've seen, even in the hospitality sector, means that the economy just reacts to news more quickly. It reacts to shifts and changes more quickly so i i do think that that very very quick increase to the rates was was necessary and useful and uh you know kudos to uh jeremy pell and the the whole gang for anticipating that yeah

and and i've heard sort of what's been described as sort of a very robust, maybe one of the best ever economies that we have right now. And with employment growth and very robust inflation, and obviously has come down, maybe not quite a target, but essentially a target. We've got the stock market at all time highs. We've got the housing market at all-time highs. If anything, it feels like maybe it's a bit frothy and there's maybe additional risk out there of a correction. How do you feel about, one, the underlying sort of key metrics of the economy? And then two, like, do you feel like we're maybe at extra risk or elevated risk at all of a market correction, given how everyone seems to think that things are great and that their asset prices seem to be pretty, I'll describe it as well-priced. Yeah.

I mean, there's, I think there might be some risks in some areas with asset prices. The fundamentals, as you say, we've got a lot of employment. We have wages now increasing in excess of which is always a good sign. And, you know, also importantly, too, we could look this last year, we saw big productivity increases, which is, you know, very positive because, you know, we can stimulate the economy and, you know, we can sort of juice it up with interest rates or fiscal spending. But productivity in the end is really what's going to determine wages and income, which will eventually determine what consumers are able to buy. So, you know, that productivity is going to that those increases are going to continue the deflation. And that's going to really help keep hiring up and keep the employment growth strong. We have seen, however, there are there are some issues. You know, there are some really big price increases to housing and housing affordability. And if there's one thing that I've seen this last year is people have been really asking a ton of questions about housing affordability. How are we going to be able to go forward with housing just as expensive as it is? There's some demographics things as well. So we've got a lot more retirees entering their golden years. We've got maybe a labor force that is shrinking. Immigration is way down, or I should say it's on the way down, if Trump's policies are to believe. And so population, and again, another source of working able-bodied folks right there is going to be clamped down at a time when we may need it. So there are some risks. But on the other hand, to your point, there's a lot of positives as well in this economy. So maybe let's take that sort

of narrative that we see in the overall economy and start applying it to what we're seeing in short-term rentals. And I want to maybe try going about it in two ways. One, and the first, let's put our investor hat on and think about as a short-term rental investor today, how am I feeling about the state of the market? And then two, as a short-term rental operator today, how I feel about the state of the market and the outlook for 2025 and 2026. How does that sound? Perfect. All right. So let's start with the investors, I said, and start with maybe a quick outline of what are the factors that investors, and we sort of hear investors talk most about, and what are the outlook for those sort of key metrics going forward? Right, sure. So, you know, this is some

of the stuff that we have been talking about earlier, some of the pillars of investment, as you described them in some of our, you know, conversations that we had. One of those is going to be interest rates. The other is going to be asset prices because the combination of those is going to give you that return on investment that you're going to be really looking for. So what we have seen, of course, with the Fed increasing those interest rates rapidly over the last few years is that the interest rate environment has been generally

a headwind.

And it's probably going to continue that way. In fact, we have revised our expectations for interest rates. They're going to probably be higher for longer. And the reason for that is that those rates were initially increased to control inflation. And the current policy that is being discussed includes some fiscal stimulus, and that includes, say, tax breaks, but also, you know, some additional spending for border security, et cetera. But that usually has a stimulative effect on the economy, somewhat inflationary. So I think to counterbalance that, the Fed is going to be a little more hesitant about reducing interest rates. Also, if we have severe tariffs or very, very high tariffs, that might exert a little bit of inflationary pressure as well. So both of those things combined, I think, are going to make the Fed more cautious about taking that down. We had initially expected that interest rates were going to decline slowly, certainly more slowly than they increased. But whereas just a few months back, we were expecting, say, the mortgage rates to be under 6%, maybe 5.5% by the end of 2026, now they're going to probably be above 6%. So that sort of number, that magic 6% number, don't think we're going to get below that in the near term future. So that's one element of that. And if we're looking for the short-term rental investor in particular, they're going to be very focused on residential housing prices as well. And this is another expectation that economists had with these high interest rates that often what happens is we had this big run-up on housing prices in the immediate aftermath of the pandemic, partially spurred by the fact that we had very low interest rates and also partially spurred by the fact that, you know, basically that was the only that was the only real estate type out there that seemed viable. Right. Retail was was not it was all shut down for the pandemic. We didn't know if that was going to be able to come back. Office, similarly, you know, was completely vacated. We have a lot of a lot of fun industrial stuff. But, you know, where else is the investment going to turn? Well, residential. So we did see a really big uptick in residential prices. A lot of us expected that, you know, we jack interest rates up at an unprecedented level and we really increased that sky high. We thought there's going to be a housing market crash. It's going to be very, very low prices, but we haven't seen that. We never saw prices go negative. Maybe briefly, they held still on an inflation adjusted basis briefly, but really hardly any pause at all. And we're expecting the housing prices are going to be continuing to increase. They might be a little bit slower in 2025, but they're going to be creeping back up to that more 5% kind of long run appreciation that we've seen in the past. Some of that might be the fact that we just haven't had a lot of transactions. So if you've got those golden handcuffs, as many people do, you've got that really low interest rate now in your home. You might not want to sell your house for a discount, knowing that you're definitely going to have a higher interest rate on the next home that you purchase. So that might just be preventing this market from moving anyway, one direction or the other. So essentially, we're in a holding pattern. Prices haven't diminished. Interest rates remain high. So those things combined are going to be something of a headwind for investment. It's going to be difficult. You're not going to be able to do like in 21 and just throw some money at it and expect an excellent return. You'll have to be really careful about and really choosy about where you put your short term rentals to make the most of your investment.

Okay. So what I'm hearing is that more than likely on the asset sort of home value side, it's sort of more of the same. There might be some pockets of increases, decreases here and there, but in general, the values that we're at today are more than likely only going up in that for those that have been waiting for interest rates to come down, we're probably going to be waiting for maybe a bit longer. So in your crystal ball or the crystal ball that we use of Oxford Economics for their interest rate forecast, they do not foresee interest rates coming down below 6% out in and over the next

two years. That's right. And that is specifically the 30-year mortgage rate for Housing Society Mortgage. Oxford is predicting. So there are mortgage rates that are above and below that, but the movement is going to be very, very slow downward. Right. So when I'm looking at the sort of and we're recording

this on December 2nd, I typically look at Mortgage Daily or Mortgage News Daily. They're sort of real time index. And we're sitting here at roughly six point nine percent today. And that looks like it's historically and roughly matched the index that Oxford forecast as well. So yeah, it's unfortunately going to be a bit in that brief touch back in September of getting close to 6% was maybe a, how would you describe it? Like a tease of what potentially could come, but that this sort of higher inflation for longer is going to sort of hold interest rates higher? Or what is this sort of driving dynamic of, and we've got the Fed lowering the short-term rates, the overnight rate that the Fed can control, but the long end of the curve, the 30-year fixed rate interest rates, the 10-year treasury are continuing or have expanded pretty substantially since September? Yeah.

And there was, well, there was something that happened between the September and today that resolved a lot of uncertainty. So, you know, that election, that was a, well, I wouldn't say a surprise, but I will say that it was a nail biter either side. We really weren't sure. And uncertainty is something that really can throw markets for a loop. And I will say too, I've painted a pretty bleak picture for the investor, but there is one silver lining in that what I'm expecting for the next few years is that compared to the roller coaster that we've had in the post-pandemic era, we should see at least some more stability, a little bit more predictability about what is going to happen in the economy. But certainly one of the changes that we saw recently was the Trump election and the fiscal plans that Trump has. We know that he's very down on taxes. Trump does not enjoy taxes. He likes cutting them, and that's going to have that stimulatory effect. And that inflation is certainly something that the Fed has been watching. It's ticked back up a little bit in the most recent CPI report. So I think that caution is going to be the watchword. Now that they've achieved the success that they have, the Fed is going to try to hold on to that, make sure inflation doesn't come back, which we know is a problem with inflation that we've encountered in the past.