What Happens to Home Prices When Technologists Come to Town(redfin.com)
redfin.com
What Happens to Home Prices When Technologists Come to Town
https://www.redfin.com/blog/2015/06/what-happens-to-home-prices-when-technologists-come-to-town.html
15 comments
Exactly the same phenomenon happens when hydro fracturing comes to town. Except the ramp up is much faster and incurs much more disruption and, unfortunately, so far, is far more short lived. By the time municipalities catch up with the demand the industry goes into a bust.
Technology on the other hand brings, so far, long term prosperity to previously declining areas. The problem I see is that municipalities want the prosperity without the consequences. They want the tasty burger without the cholesterol. Western economies, or rather, societies, have this strange unease with rapid urban expansion. An unease I have not encountered so much in Eastern economies and societies. In the east, progress is seen as generally good, whereas the west has greater suspicion of it.
Technology on the other hand brings, so far, long term prosperity to previously declining areas. The problem I see is that municipalities want the prosperity without the consequences. They want the tasty burger without the cholesterol. Western economies, or rather, societies, have this strange unease with rapid urban expansion. An unease I have not encountered so much in Eastern economies and societies. In the east, progress is seen as generally good, whereas the west has greater suspicion of it.
There was an article about that in the economist (http://www.economist.com/news/united-states/21644164-gentrif...) which basically said the economic indicators for an area are better for everyone when this happens.
> When I bought my first house, using money earned from co-founding a software company, I couldn’t believe that such abstract work could be exchanged for something so big and tangible, hewn from forests and rocks by people sweating in the sun.
I've been writing software for years, and it still feels like magic. People work 3x as hard as me and I make 3x as much as them. Many make real, physical things; i just type away on a keyboard. With the right incantations, you can build something that's worth millions. Just you, in your free time, creating something that can be used by the entire world.
Always reminds me of this louie CK interview on conan: https://www.youtube.com/watch?v=uEY58fiSK8E
I've been writing software for years, and it still feels like magic. People work 3x as hard as me and I make 3x as much as them. Many make real, physical things; i just type away on a keyboard. With the right incantations, you can build something that's worth millions. Just you, in your free time, creating something that can be used by the entire world.
Always reminds me of this louie CK interview on conan: https://www.youtube.com/watch?v=uEY58fiSK8E
I definitely had the eureka moment when I was younger. When I was in high school I worked with my sister to sell t-shirts that we designed online. The shirts were designed in photoshop, designs given to our supplier who printed them on demand to ship directly to our customers. Shirts were listed on eBay, payment made through paypal or direct deposit, and all communication with customers and suppliers was through email. At no point did we touch the product or even have a phone call with anyone.
After a couple of months we took out our first profit, which I think I spent some of it on an ipod classic. I was 14, and through clicking buttons and moving my mouse I now had an ipod in my hands that was all mine. That was magic.
After a couple of months we took out our first profit, which I think I spent some of it on an ipod classic. I was 14, and through clicking buttons and moving my mouse I now had an ipod in my hands that was all mine. That was magic.
It embarrasses me that less physical effort grants me a more valuable reward. This probably just reflects my laborer upbringing.
I put together a few lines today that automates a 5-minute process. Across the scope of a few thousand servers, this obviates about 6.25 weeks of labor. It really does feel magical.
I put together a few lines today that automates a 5-minute process. Across the scope of a few thousand servers, this obviates about 6.25 weeks of labor. It really does feel magical.
> It embarrasses me that less physical effort grants me a more valuable reward
Why? Just because you work hard doesn't mean you deserve more
Why? Just because you work hard doesn't mean you deserve more
> Just because you work hard doesn't mean you deserve more
Its a major element of the ideology associated with the Protestant work ethic, which has an important role in American culture -- and ties intimately into the way large parts of the more successful population can dismiss the less successful as being so as a result of choice and moral failing -- that hard work both does, in fact, and should, in moral ideal, result in material success.
Even lots of people who intellectually reject the position are have been to some degree socialized in it and feel some dissonance when contrary facts are particularly palpable.
Its a major element of the ideology associated with the Protestant work ethic, which has an important role in American culture -- and ties intimately into the way large parts of the more successful population can dismiss the less successful as being so as a result of choice and moral failing -- that hard work both does, in fact, and should, in moral ideal, result in material success.
Even lots of people who intellectually reject the position are have been to some degree socialized in it and feel some dissonance when contrary facts are particularly palpable.
"If you work harder you will be more successful" is the fundamental axiom of American conservatism. Of course I can't speak for everyone, but the primary reason to oppose a social safety net is "those people are poor because they aren't working hard enough." This requires a belief that hard(er) work is and should be rewarded better.
I'd say your claim is nonobvious. That the world is fundamentally fair, and that hard work is the most important aspect of virtue, are deep ideas in American culture and very much tied up with the American Dream (TM).
Contemporary liberals typically challenge the "world is fundamentally fair" part, appealing to structural *-ism that makes this untrue for people other than white men born to financially secure parents.
Few (economists, maybe) would argue that how hard you work does not influence how much you deserve.
I'd say your claim is nonobvious. That the world is fundamentally fair, and that hard work is the most important aspect of virtue, are deep ideas in American culture and very much tied up with the American Dream (TM).
Contemporary liberals typically challenge the "world is fundamentally fair" part, appealing to structural *-ism that makes this untrue for people other than white men born to financially secure parents.
Few (economists, maybe) would argue that how hard you work does not influence how much you deserve.
I would. For example, no matter how hard you work lifting a rock and setting it back down again, it produces no value and so nobody is going to pay you for it.
(Ironically, people pay to lift weights at the gym, they don't get paid to! It's pretty darned hard work, too.)
(Ironically, people pay to lift weights at the gym, they don't get paid to! It's pretty darned hard work, too.)
"Work" in this context would be your job, not things you do on your own initiative.
But how many hundred, or thousand hours did it take for you to learn enough to be able to write those few lines?
The single most important human skill is mastery of language. You wouldn't even know what the word 'labor' means if your ancestors didn't know how to use language effectively. And that's what software is all about.
The product of your work does more than 3x what you could do by yourself though, that's why it's valued more / differently. A similar argument would be made for effective organizers and the force multiplication of coordinated work.
likewise, almost anyone can chop wood or swing a hammer to break rocks.... no just anyone can write high quality code.
A power saw can do the work of a thousand men chopping wood - making the designer/builder of such a machine worth more compensation than the chopper.
Also programming skill is rare compared to the opportunity to apply it and this gives us negotiating power. In commerce, you don't get what you deserve; You get what you negotiate for.
That's because it's not how hard you work, it's how effectively you work. Writing software has a lot of leverage.
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It's still an open question as to whether this will cause San Francisco level problems. It may turn out to be a very good thing in moderation.
I think people forget that until very recently, San Francisco was actually rather fond of its tech industry. It was viewed as a creative, slightly quirky, and generally positive culture that fit right in.
Tech is actually a pretty good industry to have around. Supposedly tech jobs create wealth and, as a result, stimulate more non-tech job creation around it. The problem isn't necessarily tech, it's too much of a good thing[1]
There's also a secondary issue, which is that pacific northwestern cities have a middle-to-recent history of not really wanting Californians around, so you might be getting a more negative response from Portland or Seattle to "silicon valley moving north" than you would from Baltimore or St Louis. An occupational poll I read recently suggests that the computer industry is still looked on positively [2].
Overall, though? If this just means that tech is finally spreading out a bit, so that people can earn a programmer salary in SF (about 114k according to US news best jobs) in a place where this means they can now buy a house, raise a family, and stimulate the local economy (and perhaps an anemic housing market), I see this as a good thing.
[1] Perhaps. There is an argument to be made that tech culture has gotten much uglier with the amount of money that poured in. Also, we spend a lot of time and mathematical talent getting people to click on ads now.
[2] http://www.gallup.com/poll/156713/americans-rate-computer-in...
I think people forget that until very recently, San Francisco was actually rather fond of its tech industry. It was viewed as a creative, slightly quirky, and generally positive culture that fit right in.
Tech is actually a pretty good industry to have around. Supposedly tech jobs create wealth and, as a result, stimulate more non-tech job creation around it. The problem isn't necessarily tech, it's too much of a good thing[1]
There's also a secondary issue, which is that pacific northwestern cities have a middle-to-recent history of not really wanting Californians around, so you might be getting a more negative response from Portland or Seattle to "silicon valley moving north" than you would from Baltimore or St Louis. An occupational poll I read recently suggests that the computer industry is still looked on positively [2].
Overall, though? If this just means that tech is finally spreading out a bit, so that people can earn a programmer salary in SF (about 114k according to US news best jobs) in a place where this means they can now buy a house, raise a family, and stimulate the local economy (and perhaps an anemic housing market), I see this as a good thing.
[1] Perhaps. There is an argument to be made that tech culture has gotten much uglier with the amount of money that poured in. Also, we spend a lot of time and mathematical talent getting people to click on ads now.
[2] http://www.gallup.com/poll/156713/americans-rate-computer-in...
> It's still an open question as to whether this will cause San Francisco level problems
SF's (SV's) problem is that it refuses to build houses commensurate to the number of people who move there. Any number of well paid jobs from any industry would have caused the same problem. High paying (middle class) jobs (outside of manufacturing) are not a problem.
> If this just means that tech is finally spreading out a bit
For better or worse, the exodus of tech companies out of SV could have been prevented. The valley could have captured nearly the entire industry if it just built more houses. Billions (likely trillions over the course of a few decades) of dollars will not flow into the local economy.
SF's (SV's) problem is that it refuses to build houses commensurate to the number of people who move there. Any number of well paid jobs from any industry would have caused the same problem. High paying (middle class) jobs (outside of manufacturing) are not a problem.
> If this just means that tech is finally spreading out a bit
For better or worse, the exodus of tech companies out of SV could have been prevented. The valley could have captured nearly the entire industry if it just built more houses. Billions (likely trillions over the course of a few decades) of dollars will not flow into the local economy.
Compare the population growth in the Houston MSA against San Francisco's: the Houston area grew by 9.6% between between 2010 and 2014 while the SFBA grew by 5.9%.
Compare that to the two regions' 5-year housing price index (a measure of the movement of housing prices). The Bay Area sits at 36 yet Houston at 25. Despite faster population growth, Houston's housing prices have not risen nearly as dramatically.
I have to imagine that can be at least partly attributed to the seemingly limitless number of houses being built around Houston.
(This comparison would probably make more sense if we could compare CSAs rather than MSAs but I couldn't find a breakdown of housing price trends at that level)
Compare that to the two regions' 5-year housing price index (a measure of the movement of housing prices). The Bay Area sits at 36 yet Houston at 25. Despite faster population growth, Houston's housing prices have not risen nearly as dramatically.
I have to imagine that can be at least partly attributed to the seemingly limitless number of houses being built around Houston.
(This comparison would probably make more sense if we could compare CSAs rather than MSAs but I couldn't find a breakdown of housing price trends at that level)
Let's be honest....there are many other reasons why homes in the Bay Area are more desirable to many compared to Texas.
It also attracts much more foreign investment due to its location.
It also attracts much more foreign investment due to its location.
According to the National Association of Realtors, that's actually not the case. California attracts only slightly more international buyers than Texas.
Texas has stronger ties to Latin America and the Middle East while still attracting a not-insignificant number of Asian buyers (Houston in particular has very strong ties to Asia). California obviously does get the bulk of investment from Asia.
http://www.realtor.org/sites/default/files/2014%20Profile%20...
Texas has stronger ties to Latin America and the Middle East while still attracting a not-insignificant number of Asian buyers (Houston in particular has very strong ties to Asia). California obviously does get the bulk of investment from Asia.
http://www.realtor.org/sites/default/files/2014%20Profile%20...
I'm a tech booster, and building and zoning restrictions certainly don't help the housing problem here. But I think it's a wee bit disingenuous to suggest it's as easy as waving a magic wand and watching all the house prices fall to Stockton levels.
Even if the rate of new construction pentupled, it wouldn't lower house prices; at best it'd make them increase at a slightly slower rate. It's a good idea on its own for the purposes of environment and urban development, but pretending that it'd suddenly allow a day laborer or a teacher's aide to be able to afford rent or ownership here adds as little as the people saying tech workers are source of all evil in the world.
Even if the rate of new construction pentupled, it wouldn't lower house prices; at best it'd make them increase at a slightly slower rate. It's a good idea on its own for the purposes of environment and urban development, but pretending that it'd suddenly allow a day laborer or a teacher's aide to be able to afford rent or ownership here adds as little as the people saying tech workers are source of all evil in the world.
You don't need to bring prices down to Stockton levels to avoid San Francisco level problems.
People in Austin are saying it's a bubble. But it isn't - a significant number of homes are being paid for in cash. Often $10-20k over the asking price. Those that are being financed have fairly solid support behind them (20% or more being put down). It's not a bubble - it's supply + demand in action.
Which means that housing will be tight until the builders can catch up. Unfortunately, Austin's roads and other infrastructure weren't designed for this influx and are overwhelmed. The city leadership recognizes it's a problem, but haven't been able to produce a coherent plan for solving it. Don't move here.
Which means that housing will be tight until the builders can catch up. Unfortunately, Austin's roads and other infrastructure weren't designed for this influx and are overwhelmed. The city leadership recognizes it's a problem, but haven't been able to produce a coherent plan for solving it. Don't move here.
Bubbles are supply + demand in action, but where the demand is driven in large part by perceived future value where the underlying fundamentals to support that future value do not exist.
That homes are being paid for in cash doesn't indicate that there isn't a housing bubble -- it does mean that if there is, its not likely significantly an effect of a mortgaged-backed-securities bubble the way the pre-2009 national housing bubble was.
That homes are being paid for in cash doesn't indicate that there isn't a housing bubble -- it does mean that if there is, its not likely significantly an effect of a mortgaged-backed-securities bubble the way the pre-2009 national housing bubble was.
The question becomes, if there is a bubble, what could make it pop? Tech jobs leaving the area and not creating salaries that support existing house prices?
> Tech jobs leaving the area and not creating salaries that support existing house prices?
Sure. But other things could, too -- bubble-driven overbuilding of new housing and then having the influx of jobs stop could do it, especially if updates to shared infrastructure were deferred and the tax revenue to support them didn't materialize because the growth stopped -- the new houses would sell at lower prices because the new higher-paid workers they were made to appeal to wouldn't be there, but the total infrastructure demand would be similar, adversely affecting property desirability.
There's probably other scenarios -- and I'm not saying it is a bubble or that any particular popping scenario is likely (I don't know Austin that well), just that the fact that purchases don't seem to be mortgage-fueled doesn't mean that there isn't a bubble.
Sure. But other things could, too -- bubble-driven overbuilding of new housing and then having the influx of jobs stop could do it, especially if updates to shared infrastructure were deferred and the tax revenue to support them didn't materialize because the growth stopped -- the new houses would sell at lower prices because the new higher-paid workers they were made to appeal to wouldn't be there, but the total infrastructure demand would be similar, adversely affecting property desirability.
There's probably other scenarios -- and I'm not saying it is a bubble or that any particular popping scenario is likely (I don't know Austin that well), just that the fact that purchases don't seem to be mortgage-fueled doesn't mean that there isn't a bubble.
A tech job brought me to Austin in 1999. No state income tax and plenty of ranch land for development nearby. The University of Texas at Austin has a very powerful supercomputer and lots of sponsored research. Apple has a huge campus in North Austin and is a model for tech companies expanding out of Silicon Valley.
My friends here want me to tell you that 'Austin is Full', but everywhere you look there are help-wanted signs.
My friends here want me to tell you that 'Austin is Full', but everywhere you look there are help-wanted signs.
It's interesting to me that they didn't include Microsoft in their data.
The article itself states that Microsoft employs 100k people in the Seattle area - more than the ~78k they show for Google, Apple, Facebook, and Amazon combined.
The article itself states that Microsoft employs 100k people in the Seattle area - more than the ~78k they show for Google, Apple, Facebook, and Amazon combined.
I work in a high tech industry, I make mobile networks go.. and I'm slowly being priced out of Seattle (I live in Renton), my rent has gone up 20% in 2 years, and everywhere else I look is higher yet - this combined with the rather chilly local culture, is driving me to look at moving elsewhere, probably to a non-tech hub, like Dallas, I'd like to own a home at some point - but I don't make that 100k a year salary, and likely never will, as the best paid in my industry are making in the high 70's, beyond all that, I'm stuck as a contractor, on my second 18 month term with no headcount opening in sight.
I'm a pretty decent UNIX and networks guy - but not a software developer sort of person, its just not the way my brain is wired, so at the rate we're going, I'm not gonna be able to afford to live here in 2 years.
I'm a pretty decent UNIX and networks guy - but not a software developer sort of person, its just not the way my brain is wired, so at the rate we're going, I'm not gonna be able to afford to live here in 2 years.
Does anyone from Denver also find that the relationship is overstated? I don't know of any Denver offices for Apple, Facebook, or Amazon. The only Twitter or Google offices I am aware of are in Boulder. Boulder and Denver are connected by a single highway and the commute is bad enough to effectively separate the two tech hubs. I don't see how anyone can claim that the 1200 employees attributed to Google, Apple, Amazon, and Facebook (which I dispute is an accurate number for Denver) could possibly have any measurable effect on a city of 600K / metro area of 2.6 million.
While I don't live on the Front Range anymore, I did for 20 years. Denver to Boulder is ~25 miles, and I use to make the commute in 25 minutes (not during rush hour). It was quite common to refer to the Denver/Boulder metro area. I know things have changed, but ~1hr commutes don't seem to me to be significant enough to be called separate.
36 is REALLY bad these days, especially with the current construction. I live in Boulder and when I was recently looking at jobs I made that drive to see if I could deal with the commute.
Nope!
Nope!
As someone who moved to Seattle for a tech job, it's very exciting seeing the boom. Jobs are spraying everywhere; hope and life are flowing. It is frustrating to see the house prices go up, but the sense of change in the air is often almost palpable. Very thrilling.
That's funny, because everyone I know from or in Seattle who doesn't work in tech is talking about how it feels like their city is under attack and being destroyed, sort of like how it feels for everyone not in tech in the Bay Area.
Hope and life are indeed flowing here in Seattle. For some into bank accounts, for others into dump trucks. Thrilling isn't the word I'd pick, but how could newcomers know what's been lost? Expecting empathy from them is unreasonable. As absurd as expecting someone to see around corners.
Seattle's traditional Capitol Hill residents are really struggling with the tech influx, just down the hill in SLU. New bars and restaurants open daily, rents have skyrocketed, and their arts scene is being pushed up the hill and to the east.
rents have skyrocketed
This is an easily solvable problem: http://www.amazon.com/Rent-Too-Damn-High-Matters-ebook/dp/B0....
Capitol Hill height limits and parking minimums are insane. I used to live across the street from Seattle U, and the apartment building was only four stories high. It should've been 20 stories, since everyone in it was connected to the university. Every street west of Broadway / 10th and south of Prospect should have no height limits or parking minimums. The problem can be solved: Seattle's politicians (and, by extension, voters) choose not to solve it.
This is an easily solvable problem: http://www.amazon.com/Rent-Too-Damn-High-Matters-ebook/dp/B0....
Capitol Hill height limits and parking minimums are insane. I used to live across the street from Seattle U, and the apartment building was only four stories high. It should've been 20 stories, since everyone in it was connected to the university. Every street west of Broadway / 10th and south of Prospect should have no height limits or parking minimums. The problem can be solved: Seattle's politicians (and, by extension, voters) choose not to solve it.
New bars and restaurants to enjoy, what a struggle!
The problem is a lot of people can't afford an artisanal $15 whisky sour, but a 25-year-old single software developer bringing in $100k doesn't have to think twice about buying three of them.
#amholes #amazonkilledseattle #gentrification #dudebros #richdicks #highrent #anotherbar #morecondos
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Correlation is not equal to causation. The article feels like link bait to drive more attention to redfin.com.
ask seattle, they are dealing with it now and many of the locals aint to happy.
not only have housing prices gone up, traffic and crime have as well.
not only have housing prices gone up, traffic and crime have as well.
> crime [has gone up] as well.
Despite what the talking heads may have you believe, crime has dropped significantly in Seattle since its population and economic growth.
http://www.city-data.com/crime/crime-Seattle-Washington.html
Despite what the talking heads may have you believe, crime has dropped significantly in Seattle since its population and economic growth.
http://www.city-data.com/crime/crime-Seattle-Washington.html
Interstate-5, a fully-featured modern interstate highway, is a modern marvel. In the middle of the afternoon, we can travel an entire 13 miles in the span of just 60 minutes!
Many of the locals appear to be avidly hoping to follow SF in anti-growth measures and laws.
It's a very discouraging time to try to buy a home in Portland now. I can't really figure out what to do about it.
What is the market like there?
Insanity. When I was out looking a few weeks back, my realtor got a call from another realtor who had just closed on a house for $402k, which had been listed at $365k. Lots of people getting blown out by all-cash offers. Every house you look at, the sale history shows it was bought in 2014 for $172k and it's on the market for $300k, a lot of that sort of thing. I looked at basically a dilapidated shack that was $300k because it was near the New Seasons on NE 33rd.
I waited until I had a full 20% to get in the market, turns out I should have bought earlier because the 20% isn't going to help me now anyway given the all-cash offers out there. From what I have heard, a lot of this is due to foreign capital looking for a value store. But I also think this will just continue and get worse, as people in the Bay area look at the quality of life in Portland, compare housing prices, and conclude (rightly IMO) that the move is a no-brainer.
I waited until I had a full 20% to get in the market, turns out I should have bought earlier because the 20% isn't going to help me now anyway given the all-cash offers out there. From what I have heard, a lot of this is due to foreign capital looking for a value store. But I also think this will just continue and get worse, as people in the Bay area look at the quality of life in Portland, compare housing prices, and conclude (rightly IMO) that the move is a no-brainer.
And in the future this will look totally reasonable. The full house prices you quote are what houses in the Bay Area routinely sell for OVER list price. When I started looking in 2012, the average sale price in my area was $900k, and now it's $1.7m.
St Johns. Lents. Milwaukie. East Portland. SW Portland (Markham, Terwilliger, Multnomah Village)
There's some good deals out there still but yeah.. in the same boat as you. I'm working on compiling historical pricing on a neighborhood basis so I can focus my attention on areas that haven't been seeing 10%+/yr gains. West Hills, for instance, homes have been appreciating only about 3%/yr. Of course those were way out of my budget to begin with...
There's some good deals out there still but yeah.. in the same boat as you. I'm working on compiling historical pricing on a neighborhood basis so I can focus my attention on areas that haven't been seeing 10%+/yr gains. West Hills, for instance, homes have been appreciating only about 3%/yr. Of course those were way out of my budget to begin with...
Prices have gone up something like 20% in the last year. Houses are going for $10-20k over asking in cash within days of being listed.
Imagine if some of that wealth creation were being used for something - even just making people financially independent so they could work less and pursue their own interests. Instead it just goes to the banksters that print the money.
The industry is destroying everything it touches and there is nowhere to run.
Only because we insist that everyone work 8 hours a day to eat and have a place to live though we don't have to.
Being poor is just a lack of liquidity. Minimum income is opening the bank bailout philosophy from just corporate persons, to all persons. But human people act differently than corporate people, so maybe it will work in this scope.
Edit: If you disagree, could you please say why? I can be dense and clueless, but it's hard to improve if I'm ignorant.
Edit: If you disagree, could you please say why? I can be dense and clueless, but it's hard to improve if I'm ignorant.
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I don't disagree with what you said because it doesn't appear you said anything of substance. Perhaps that is why people downvoted.
Mostly true, but I'd like to know why.
I doubt that the problem is coders and tinkerers (well, I am one, so I am biased).
I doubt that the problem is coders and tinkerers (well, I am one, so I am biased).
It has nothing to do with the technology sector directly; It's just about money and the pendulum swinging back towards urban living being considered desirable. A booming sector of the economy combined with a relatively affluent portion of the population wanting to move into geographically constrained areas that have been neglected in terms of development for the past few decades.
And a large number of now rich people in other countries looking for assets outside of their home country's control - which in SF is just the same as it is in London
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What would be interesting to me though would be data along the lines of "What is different when technologists come to town vs. [insert some other group]"
- What does it do to supporting industries/economies?
- Do schools start performing better?
- Do the local municipalities fare better because of the group that is coming in?
- Do maker labs start springing up?
- Does the level of poverty decrease?
That's the kind of stuff I'd be interested in learning about. I guess I'm asking what ACTUALLY happens when technologists come to town that's different than when doctors come to town or garbage men, etc.