Housing Bubble 2.0 – Massive Market Disruption Occurring in the US Housing Industry

hello everybody Randy Patrick here time for housing bubble 2.0 news of the week or as I like to call it another episode of as the housing market turns more news this week stuff going on let's get to it really shortly here today is a Thursday June of 27th and if you like please help my channel grow click that subscribe button I would really appreciate it thank you now also feel free to reach out to me with your real estate questions and concerns I know a lot of you have and I'm and processed a lot of people right now so that's great so again the best way to reach me is to hit me an email because that is the best way and it'll be in the top comment it's on the about us information section and I'll put it in the top comments the pin the comments for the video as well too so today my topics are going to be kind of interesting today there really is a massive market disruption going on in the real estate and housing market today and I think it's gonna have some long term effects for us and we have to understand what's happening so we can deal with it but again it's just the other day it occurred to me that we have a lot of disruption happening in the market place and I think it's just the you know it's time that things change and they're changing right in front of our eyes so we'll talk about that in a second here I want to go through the news so apparently news today is pending home sales roar hire a butter stuck below year-ago levels so numbers I guess the pending home sales jumped by a seasonally adjusted 1.1 percent in May but we're 0.7 percent lower than a year ago on May 2018 that's according to NAR National Association of Realtors basically the you know this index the pending home sales is tracking home contract signings and this basically may mark the 17th straight month of annual declines so every year or so every month the year is declining and declining decline as far as pending home sales are concerned obviously this is a contract exciting so this now represents future closings so typically 45 to 60 days out is what we're looking at here on average so again this is you know if this is slowing down then our future closings will be slowing down as well too so big picture I guess the the you know this is from MarketWatch and I guess the you know their comments are the housing peaked for this cycle in late 2017 which is kind of consistent to where we hear a lot of the analysts have mentioned that before as well to combine sales of newly built and previously owned homes have stagnated since then and you've got occasional up ticks here and there but you know the rest economy is slowing and it's not likely we're gonna see anything major happening that's going to increase the sales and values in the housing market so that's a scoop on that but I have to laugh though this goes to show when we talk about the the media and how everybody puts their spin on things and the you know pending home sales roar higher well a one point a one point one percent month-over-month increase to me is not a roar whatsoever right so that's just my perspective adam data solutions put out there q2 q2 2019 us home affordability report and again it shows the median home prices in the second quarter of 2019 were not affordable for average wage earners in 74% of the country alright or 74 percent of the counties that the report analyzed let's be clear here basically the largest populated counties were meeting home priced second quarter was not affordable for the average wage earners included Los Angeles County Cook County California Maricopa County Phoenix San Diego County California and Orange County California as well too so basically most of the unaffordability is happening over on the west coast with a little bit here and there throughout the middle part of the country so again and how they how they calculate this they basically take a assuming a 3% down payment and a 28 percent maximum front end debt to income ratio you know as far as mortgage prices are concerned that's how that's what they're using as a calculation to gauge you know affordability so there you go a home price appreciation is outpacing wage growth and 40 percent of the markets so we knew that and take a look here at 61 percent of markets are less affordable then there has toric averages so again lots of information going on here but as we all know it's it's just more difficult these days to afford a home and if prices are slowly I mean prices price appreciation is slowing but I think we see something else happen in the other end which is wage growth and job loss and and things like that so that's probably what's messing around with the marketplace this is interesting baby boomers creating near gridlock by Aging in place so obviously with respect to the inventory shortages out there's obviously more inventory comes in the market that you know reduces some price points it gives us more to buy more choice more competition etc good for homeowners and homebuyers right well apparently baby boomer baby boomers account for 75% million Americans and why we have this gridlock is because they are deciding or they're opting to age in place so unlike maybe a previous generation who would sell their home and retire and go to retirement community downsize whatever the baby boomer generation prefers to stay in place in their homes that's according to a Freddie Mac analysis that was conducted recently so a study released in January by Chase Bank found that 76% of baby boomers owned their own homes the story said about 66 percent of homeowners think that home values will rise an 88 percent of them are planning to renovate with the next three years so you know that's that's a two-thirds are basically thinking they're going to get more equity out of it and they're also going to renovate so they're staying in place and they're not moving as far as we're concerned here baby boomers tend to think that the house has been good enough for them it should be good enough for the next generation and the conflict is under estimating understanding the repairs boomer might think that an older electrical service or older plumbing is fine but to millennial who could possibly purchase the property that's flashing dollar signs because they know they'll have to replace at some point in time so again you know it's funny that so the boomers generations not is not really considering that that not everybody has the same tastes or desires with respect to home ownership and style and configuration you know etc size that they do in their in their properties there so thus they're staying longer there's more gridlock and these aren't coming to the marketplace and if they do it's not necessarily interesting for the buyers the next buying generation of Millennials is well too so this is where we have gridlock to make matters worse for you if you want to talk about house flipping and gridlock well article about Zillow Zillow has their I guess you could say new company called Zillow offers ultimately the Zillow offers is really designed to buy your house they're gonna buy your house and they're going to resell it they may do some work they may not so for me the real issue is that Zillow plans on buying 5,000 properties a month now Zillow offers is probably only going to work in certain major cities and communities right now I don't know which ones they are I'm you know there's still a fair amount of them like the other eye buyers they're implanting and deploying and the major metros and working their way through that funny enough though you know Zillow basically saying that you know it's about helping people because it's really the stressful process of selling a home so this is a stressful process for the average person Zillow can jump in and buy your house you can do some quick you know stuff online with Zillow and they can give you an offer and excuse me the seller then chooses the transaction date within a 90-day period however Zillah Zillah will offer a service fee that amounts to 7% of the purchase price on average so nothing is done for free but you know I think you take a look at the concept it's like let's just get this done listen let's not go through open houses in the listing process and you know making sure that everything is clean and tidy and then having to to deal with you know back and forth with with sellers and buyers and concessions and financing all those other things so maybe people again are tired of this that's from their perspective they think that if they're gonna buy 5,000 homes a month that this is is obviously working they've probably seen some of some analysis that indicates that they have a market here so very very interesting so when you take a look at this so what's going on with the housing market I'm not going to talk about news anymore I'm really gonna get into some some commentary which i think is long overdue so you know we have all these news issue issues I just spoke about and there are I guess you could say forces evil messing around with the housing market we see that there's more and more i buyers you know in the market today and they're hitting major cities first there and then they're working away through the suburbs they're gaining market share because if they're deploying more and more people are using those services and more our people are willing to explore the options to consider them which is interesting so is it a better way to sell your home I don't know but maybe it's enticing to not deal with what I've talked about before with respect to they'll let you know picking a real estate agent the listing process and doing all the curb appeal and cleaning and painting and fresh in the house stuff and then having showings you had a take off you know be under the house when you have open houses and showings and then the whole dance with respect you're doing a contract and everything that takes place afterwards so maybe you know that this is the attractive part of the homeowner it's quick it's easy you know you're basically selling to an application and you're not having to go through all that and maybe there's some comfort there you know you know we can get everything pretty much from our phones right now including mortgages biosign houses so it's a new way of doing things I think that you know we have to prepare them this is going to take shape and take a hold of a lot more people so not only do we have the these I buyers that are now just repping the marketplace and that's where I talk a massive market disruption this is only going to grow and more and more people will look at this as an alternative so it's only got to be that's here to stay as simple as that we now have to compete against investors and you know everyone watches TV everyone goes to the seminars on the weekends or during the week or in the evening time when the TV shows come through your town or your city and they talk about you know fix and flipping and rehabbing and making money and real estate and they show these wonderful you know homerun scenarios it makes people want to participate in the market share of doing real estate as a way to make this your number one income or to supplement or add to your to your bottom line so why not do that so according to Adam data solutions 7.2 percent of all sales in quarter 1 2019 were flipped homes and this is at its highest rate it's been at since a decade so about 10 years so which would put us kind of right back to where last housing crisis or right so that market isn't without issues though by the way apparently the industry is also ripe with mortgage fraud and what we're funny now is that because the market slowing down there's more inventory and prices are starting to slow that more and more flippers are holding their properties longer and maybe getting stuck with them and they obviously need to get a sales price because you got your acquisition cost you've got all your your cost to repair rehab remodel then you've got your money costs that you kind of pay back from the lender whether it's hard money or private funding or whatever it is you've got to pay that stuff back so a problem is that you know and then don't forget you got closing cost you sell as well too so a lot of that has to come out in the transaction so they're finding that because it's taking longer and longer to sell a lot of these flippers are not able to meet those commitments financially and then may fall into the foreclosure process and then when that happens things might pop out what does that mean well maybe you're getting loans that you shouldn't have gotten maybe flippers not going to be the on or owner-occupant it's a form of occupancy misrepresentation so the point is that what they're making is that you're we're gonna see more and more of these issues this year and next year as property takes longer to sell people obviously are more concerned about price points and those that have gambled to say hey I'm gonna I'm gonna buy a home and remodel it and make my money on the back end here are going to have more and more difficulty cashing out and paint off the loans whether they're private mortgages or let you know like finance you know recorded mortgages it's it's gonna cause them a lot more chaos so again that's more competition for us we also know there's more more larger and corporate investors playing the game here they're buying homes there they may not be buying it like they used to but there's more of them out there so some of the massive hedge funds are have actually dialed down some of their their purchase but other ones have sort of taken their spot so they're also raising capital they've been quietly raising a lot of capital over the past couple of years so the single family rental the single family home rental is now I think the preferred asset class to make money it's solid it's tangible if you buy it appropriately and correctly you're going to have cash flow you're going to have appreciation you're gonna have an asset which you can be leveraged which is great well we know that some of these investors are they're buying one in five starter homes now so 20% of the market is not going to first-time homebuyer starter homes it's going to investors who are in turn doing what renting them back out to people so now we've got competition so the first-time homebuyers are competing against you know investors that are typically cash investors that's not that's tough for them they're also buying inventory directly from the builders so to walk into a builder and kind of deal to buy five homes ten homes twenty homes you know is pretty decent and I'm sure they're getting good deals as well too because if I'm a builder someone was to walk in and do that I'm gonna say let's talk I won't if I can unload number of properties and somebody's going to buy them with all cash you know who – say no to that right so and and to further make things difficult we know the banks and lenders you know are holding back the foreclosed inventories so there are a few there are really actually few bank owned properties so they get foreclosed on they go back to the banks inventory and then you know in theory they should come back out to the market on the MLS as what's called an REO bank owned real estate owned well we know there's less and less of those how do we know well we look at the sales figures you know the most recent sales figures for May from National Association Realtors only 2% of all the transactions were distressed properties those distressed properties are made up of short sales and foreclosures real estate homes that are on the MLS when I say on the MLS they are listed by a real estate agent via the lender and they're available to the general public so to me that's a non-market property where you can look it up on Trulia and Zillow and realtor.com and you can look at this and go okay there's an opportunity for me to possibly buy that property so again there's few of them that are coming on we know that significant amount of these investors are buying foreclosed homes at the auctions or their cash purchases at the auctions and if it's not actually sold the auction it goes back to the lenders inventory and the lender does not as I said put them all B's back out in the marketplace because we can tell by the one or two percent that actually hit the market you know they hoard them and they hold them and they sell them a non-performing asset pools to other institutional investors hedge funds real estate investment trusts whatever so a lot of these properties that are going back to the lenders or either you know being purchased at the auction or they're not ever going to come back out to the marketplace so they don't come back to the marketplace that's less homes for the average investor to engage in and also those homes are not going to to enter the marketplace as cheaper properties to to assist in driving overall prices down so it's kind of this hold the inventory keeping property values at higher level is not good for the average buyer some of the servicing companies so some of the people that are servicing these for you know pre foreclosure mortgages when they take them back you know they put them back in their own inventory they don't put them out in the marketplace they have their own auction portals there's auction dot-com and hubzu and those are online auction portals now they're different than the county auctions or that's like you buy it either you buy it or it goes back to the bank these are already back in the banks inventory some of these properties and these auction services are out there and they're these portals are owned by the bank servicing companies so they're all it's all connected and they have options and they have online auctions and you can look at them online and you can place bids and usually it's over you know it's not like it's happening that day it's over maybe a week or two week period they want the highest bidder they have reserve prices they're gonna charge you a buyer's premium fee typically a five percent and the issue is that because they have reserves you may have won the auction but they may come back to you and say oh guess what didn't meet our reserve price so even though you won the auction we're not gonna sell you the home there's no obligation there and they're gonna wait for a week or so they're gonna put it back on the marketplace so they're kind of messing with the market trying to get the best price which really is making it difficult for for home buyers now I can tell you that right now that you know this is not pretty probably a comfortable thing for a lot of owner-occupant primary home buyers you know you really have to use its buyer beware regarding you know title clouds other liens it's still with the property the condition the property you may not be able to get in and check out the home so again it's not something that is probably right up every average home buyers alley it's what I'm trying to say and again difficult for the average homeowner to navigate this minefield too many unknowns to them and most of people are not aware educated as to what to look out for when working through auctions like this it really is a buyer beware so it's clear to see that the market really is going through some huge disruption and for many different perspectives I look at it today it's more difficult than ever to buy a home you got price points you got lack of inventory you got a lot of competition we didn't have before affordable homes of the segments that I think are the worst off clearly and more clearly most of the buyers fall into this category clearly a lot of the investors would like to purchase in this category as well too because they are more affordable so we seem to have this this segment that's really getting bombarded you know with a lot of of I guess you could say so the disruption and a lot of of the efforts in this market segment but I also see a trend here that I think needs to be addressed and it gave me pause for concern than a day because I'm getting a lot of emails from everybody out there which I appreciate I'm talking to a lot of people and I've kind of noticed a trend here and and the trend really is it's waiting so everyone is waiting to buy and you're waiting to buy a primary home you're waiting to buy an investment home you're waiting to see a significant or material drop in the values before you pull the trigger and now our issue as consumers as average home buyers maybe even average mom PHA investors is that we don't know what the price points are going to be at we don't know how much it's going to drop we don't know when it's going to drop we have some ideas but you know the number one question people ask me is when's it going to crash and how much is it going to crash well I don't have a crystal ball unfortunately if I'd if I could and did I'd tell you guys right up off the bat here but we do have history we can go back in time we can we can take a look at what happened the last housing crisis well ultimately in the end we lost about 30 percent across the board on an national ubiquitous kind of level now certain markets were more extreme and they appreciated more and they depreciated more up to fifty percent or so some markets didn't get hit as hard with appreciation and therefore didn't have the the loss as well – so it's all it's all kind of you know it's different for every wherever your metro is but the blend was about 30% you know everyone's talking about the recession how we've seen yield curve inversions and and all all the the economists are sort of saying end of 2019 really 2020 we're going to see the recession hit so that's sort of what that's the I'm just reporting what you can read in the news as well that's where I think it's going to be so again my point here's that we're seeing a trend with people and waiting waiting waiting but if you step back as to what's happening right now the market disruptors what I kind of envision which I never never thought about until again yesterday is the fact that they're going to be ready to jump into this market with you know two feet and deep and hard when prices drop so if you're sitting on the sidelines go well I'm gonna wait til I see something material and then then I'm gonna participate well it might actually be too late or they're going to have a head start on getting deals and properly ahead of you so you have to think about that and think about that so these other buyers these eye buyers these other investors you know hedge funds reach whatever they're not going away they want to buy more and they want to buy more at cheaper prices so they're gonna be vulturing on this entire market watching it as it goes down participating the best way they can so you know they're not going away here you know so there will always be competition in the marketplace it won't go away we just have to figure out how to get to the homeowners before they do so get you know and as I talked to people to me the best way to do a deal is to be direct to the seller you know if you have a relationship with the homeowner with the seller and you can talk to them that's great you have a one-on-one discussion forum and there's no interference out here you know working through a third party there's gonna be markup as we fees etc it's not gonna be the best for you to buy a house you're not gonna get it the best possible pricing point that's my point here so again we got to look at off-market property he's gonna look at the distressed properties this is the way to go we want to go and engage the market niches that the I buyers won't hit that the average real estate investor doesn't want to play in and you know that Zillow is not is not going to go after that's the things that we want to do there's still our markets available to us in the distressed area and that's where I think we have to focus I want everybody to start thinking about this now because you know next year when you suddenly want to buy a house and let's get going you know you've got to look at your mortgage options do you have that figured out yet do you know what you're pre-approved for if you want to invest you know there's a lot more investor type mortgages and financing out there for cash flow rentals for a fixed in flip for air being beep there's a lot more you know need you know breeds innovation which which you know brings more products and services to the masses so right now there's more lenders out there for primary homes and there's a heck of a lot more lenders for investor options as well to that there's a lot going on there so don't think that you can't get a mortgage don't think that's not possible start exploring those options now it's better to be pre-approved and understand what your capacity is so when you start looking for a property you can react quickly and not have to be beat up by somebody else so again I watch everybody start thinking about this now real estate now is looked at as a commodity I mean it's not it's a nice to live in a house but it really is now a numbers game and everything is being financialized so to speak and you know that's because our markets being disrupted and and there are different players in our market now than there were in the last housing crisis that we have to be fully aware of that so educate yourself about financing options are there many out there as I mentioned as well start looking around your neighborhoods go for a drive all right look look through Zillow and look at the at the foreclosed homes the pre foreclosure homes drive around neighborhoods start making notes as to what properties look a little bit distress take a picture with your camera phone all right write down the address go back home research the property maybe something's going on with it maybe it's not for tun D for you if there's not a for sale sign in front of it there could be an opportunity right there that you're passing by so start to become aware of your surroundings when you're driving around town and when you're driving around various neighborhoods etc etc so and again you get home you should check out some information look at the property appraised or do some research in the property to see what's going on you never know what you're gonna find and again for us to never pay retail this is the way I see it so never pay retail the average sort of owner occupant buyer or the average sort of new mom pop investor we're gonna have to go into uncharted territory to look a little harder for these deals in order for us to get our hands on better pricing more equity more flexibility in the transaction so I look at a going we have to sort of almost use the investor mindset and blend that with the retail approach because right now you know just looking at properties you know a lot of people are frustrated and they don't get what they need to get out of it and and again another sort of comment that I've had from people is and this is not a knock on the realtor community it's just what it is what it is that you know a lot of real estate agents you know are just you know contract processors or right here's a contract we'll see what happens or they didn't want to buy it didn't want to go to contra didn't like your numbers will move on there's a lot of there's not a lot of servicing and negotiation going on on average which is frustrating a lot of would-be buyers so please keep that in mind so again I just go back to the whole point of blending the two concepts I think we now have to start blending retail buyers with investor concepts in order for people to be more more open to look at different types of solutions or different types of ways of acquiring homes again you don't have to buy things off the MLS right you know if it's a good deal great or if you want to negotiate wonderful but if there's ways to get your hands on properties because there are many that get you what you where you need to be at the price point need to be start looking at those and I can hopefully help you with doing that so again please thank you sorry thank you very much for the for the views today thanks to the comments and the questions I like to hear what you guys have to say if you're not already a subscriber please help my channel grow & subscribe I'd really appreciate it and again reach out to me my emails will be in the comments and I can certainly assist you with a guiding you in the right direction give me some ideas for helping you understand and navigate this retail slash investor market you take care now

41 thoughts on “Housing Bubble 2.0 – Massive Market Disruption Occurring in the US Housing Industry

  1. When you actually take inventory as to who is really participating in the Housing Market, it is surprising. The Single Family Residence (SFR) is the favorite asset class now. Don't sit on the sidelines and watch the market pass you by – educated yourself in order to help yourself get a better price or better terms on your purchase. If you are not looking at this huge opportunity to either invest in Real Estate or purchase a Distressed Property at discount prices for your primary residence, you should seriously consider doing this. Short Sales are Foreclosures have proven to be much more inexpensive in price – yes they may come with some challenges – however the discounts outweigh the issues. For more information on how to learn these techniques, please contact me via email at: ([email protected])

  2. When or if it happens again like '08 I'll be buying foreclosures for less then half the value turning them into rentals .

  3. Randy, thank you. You are very nice and factual but patience is a virtue. This will only get worse.

  4. Houses are way too expensive. The average family cannot afford to buy a home. Wages have not kept up with inflation.

  5. I qualify for VA Loan benefits but I can’t afford the PAYMENTS on a $300,000+ house. And that’s about what it takes to live outside the ‘hood’ today in most states.

  6. Hi Randy just got back after living like a local in Germany. Over there old houses actually depreciate like car. Our friend purchased a 380K Euro house . 3000 sq. Ft, three floors 5000 sq ft lot. Nice neighborhood a block from the Gymnasium (high school). A decade later it is now going down in value every year . House is now 45 years old. Us here in Menifee California , Zillow predicts a 2 percent appreciation or just inflation,add depreciation it’s going down in value then?

  7. Excellent and disturbing information and view point Randy…. my wife and I are doing the "when is it all going to bottom out so we can run in with our 20% downpayment and save so much money compared to if we bought in 2018/2019" – the idea that "hedge funds and other investors" will doing the exact same thing, makes me sick. it is what it is… I guess the true advantage approach is to be fully aware of "when the market is nearing the bottom" and purchase just before that happens as the "investors" will be holding out (hopefully) for the ultimate lowest prices and highest inventories…. the new way of life when purchasing a home is never going to benefit the middle or lower middle class working american, this just sucks and I fear for my children and everyone else's children and grand children. you are the best out there Randy, keep it going!

  8. Yes Randy! Great info today as always. I'm designing a calling card to hand out to everyone I meet. I need to find my forever home!

  9. I just keep trying to save my $$$ hoping that all of you real estate doomsayers are correct. A crash would be great but I believe a correction by about 15-20% is more likely.
    Unfortunately I live in Palm Beach County Florida and nothing seems to really go down.

  10. Now that so much wealth is concentrated at the top they maybe able to finally corner the housing market and steal our country out from under us turning the majority into renters and permanently fixing prices

  11. Really Real estate should totally be a rental game,in all else fairness that's what it truly is.We use rented money or rent digits from a bank then go buy house on rented land that you will never fully own just to plan on dieing with the hopes that u paid off these 4 walls. With pipes an Windows to maybe leave to you family rent free on land that they now pay rent on!Hhhmm sound zero sum to me,so when if u look at it that way prices increase shouldn't matter because at any end to the game of homes is either u pay to play or pay to say..Zero sum game

  12. california idiots were buying like crazy at the peak of the last housing bubble most of them lost 70 percent of the value of their investment within 2 years.Most of the I buyers will disappear when the stock market corrects just like the dotcom bubble.

  13. The other thing to ask yourself is
    "Would you want the property if the taxes doubled or tripled?"
    This will be happening very soon.

  14. The banks and appraisers are tightening and sellers will usually offer a very nice discount to close quickly.

    For those who have cash in hand, you have an advantage in any negotiation for these properties.
    I know the benefits of using other people's money(debt), but there is something to be said for living with as little debt as possible.

  15. Based on how quickly you and Bull Boom Bear Bust are churning out these videos, things must be getting worse, fast.

  16. Thanks Randy here in Western Wisconsin existing houses are on the market for a few days and get over list price offers, it's definitely going to turn over here soon, I'm waiting for a good deal on a fixer upper when the bottom falls out. Waiting to see what the Fed does and the currency reset.

  17. What exactly are you preaching on your channel here? Wait to buy..things are going to get better…….or……your all screwed start looking for non existent deals in this overpriced market? Seems that every week your data analysis contradicts the previous video you put out. I could have told you a year ago that the market …even if prices dropped slightly would remain next to impossible to get into because not only are you competing with big zillow like corporations but additionally your fighting other buyers waiting on the sidelines. Ill be honest I watch every week in hopes of good news but the patience is wearing thin. I understand your not making the data up but I hope you understand that the good people who watch your videos are praying for you to tell them news about housing that would allow them to possibly get in. I mean give us your honest expert opinion already on how to proceed in this market……its either a hard “wait until things go on sale” or “buy now things aren’t getting better”. Please don’t take offense to this its just this real estate thing is getting ridiculous.

    Nick from NYC.

  18. Prices aren't going to fall and there won't be a "crash". Prices aren't likely to go up, either. Where we are and have recently been, is stagnation. Get used to it. Do you have a plan?
    With stagnation….. where can a planning person go? Everyone thinks and is planning for a huge drop; that's why it can't happen.
    The consumer looks different than they did 20+ years back. Investors look diffferent and have more money and tools at their disposal than they did 20+ years ago.
    The place to look for deals is going to be in commercial retail and those mcmansions that are grossly falling apart and out of date. But even those super deals are going to be a few years off.

  19. Up in Seattle, home appreciation YoY in May was 0%!!! That’s right, the hottest market in the country for two years + has come to a screeching halt. I am sure there is nothing to worry about / sarc

  20. Zillow offers sounds like the car trade in at the dealer scam where they offer you about 25% of the retail value for your car so they can flip it for 75% profit. I doubt home sellers will fall for margins like that but they will low ball heavy and try to sell over market value.

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