A day after soft GDP report, we find US spending and incomes growing strong in March

One day after a disappointing GDP number of 1.6% was released from the Bureau of Economic Analysis, the BEA came back today to tell us that Q1 ended strong when it came to income and spending.

People’s incomes rose 0.5% in March; spending grew 0.8%. Both figures are in current dollars.https://t.co/eDZgP9dKNk

— BEA News (@BEA_News) April 26, 2024

March PCE core MoM came in as expected +0.3%, while PCE core YoY +2.8% vs +2.7%E. We will hear talk today that while inflation is OK, inflation progress is “stalling” which gives the Fed license to hold off on cutting rates until late-2024. pic.twitter.com/4zAB2wgrEU

— Gary Black (@garyblack00) April 26, 2024

7/A higher pace of underlying real spending growth suggests #consumption doesn't support disinflation either. And as underlying #inflation trends likely remain more in line with 3% core PCE #inflation than 2% at least into Q2, the #Fed is unlikely to cut rates this summer.

— Jan J. J. Groen (@jjj_groen) April 26, 2024

Sure, the media wants to make the 0.3% PCE inflation index a major part of this report. But given that the BEA told us yesterday that the same gauge went up by a 3.5% annual rate in Q1, 0.3% would be what we’d expect.

What we didn’t know is that spending and income growth picked up at the end of the quarter, well above the rate of inflation. Real Personal Consumption Expenditures were up 0.5% for March, and Real Disposable Income was up 0.2% last month. Multiply that by 12, and both stats are more than double the Q1 annualized rates of 2.5% consumption growth and 1.0% growth in real disposable income.

Even more heartening is that wage and salary growth had a second straight month of strong growth (0.7%, just like February), which are the largest back-to-back month increases since the Summer of 2022. But we aren’t seeing anything close to the 8-9% inflation rates that we were seeing in the Summer of 2022, so this translates into real wage and income gains instead of catching up to price hikes.

My only concern with this report is the fact that the increase in spending ($172.2 billion on an annual basis) was ahead of the $122.0 billion increase in income for March. This means that the savings rate fell to 3.2%, which is well below the 5.2% rate we had this time last year, and back down to the levels we saw in 2022.

Put it together, and this indicates that we are far away from recession, and in fact, the US economy was likely accelerating as the quarter ended. The one time setback in inflation-adjusted growth and spending that happened in January (largely due to price hikes at the start of the year) has been overcome, and it portends a strong start for Q2.

So no, I don't think the slowdown to 1.6% GDP for Q1 reflects anything beyond a jump in imports, and isn't a sign that we are heading to stagnation for the rest of the year. It doesn't necessarily mean things are clear and easy, and we especially need to see if corporations try to take advantage of the strong consumer spending and wage growth by jacking prices and profits higher. But with oil and gas prices plateauing in April and unemployment claims staying low, I would hope we see some of the economic and monetary fear-mongering calm down as we get the monthly data reports between now and Memorial Day.

GDP disappoints and inflation high in Q1. But people have no reason to be freaked out

Today featured the first look at 1st Quarter GDP in the US. And given the strong job and spending growth reports that we've seen, it seemed to be another quarter of good overall growth.

So what did we get?

Dow Jones Industrial Average falls back after US GDP flubs expectations but inflation still hot https://t.co/TNqJOTgPbi #DowJones #Equities #GDP

— FXStreet News (@FXStreetNews) April 25, 2024

US GDP for the annualized first quarter grew by 1.6%, well below the forecast decline to 2.5% from the previous 3.4%. It represents the slowest pace of GDP growth since September of 2022, but an uptick in Core PCE in Q1 kicked the legs out from beneath rate cut hopes. Q1 Core PCE rebounded to 3.7%, climbing over the previous 2.0% and overshooting the forecast 3.4%. Headline PCE inflation also overshot, printing at 3.4% versus the previous 1.8% as inflation remains hotter than investors hoped.

Ugh. But then you look at the actual numbers and the components involved in the GDP print, and it doesn't seem too bad to me.

The increase in real GDP primarily reflected increases in consumer spending, residential fixed investment, nonresidential fixed investment, and state and local government spending that were partly offset by a decrease in private inventory investment. Imports, which are a subtraction in the calculation of GDP, increased.

In fact, there was more home-building at the start of 2024 than at the end of 2023, and consumer spending growth stayed at a strong pace. It was only the trade and government sectors that caused the declines in GDP at the start of 2024.

The big jump in imports doesn't seem like a long-lasting drag, especially with more reshoring starting to happen in the country. I'd be a lot more concerned if consumer spending or home-building declined in Q1, but none of that happened.

The flip side of the report that spooked the markets was the inflation figures.

The personal consumption expenditures index, the Fed's preferred inflation gauge, rose at a 3.4% annual rate last quarter — much higher than the 1.8% in the fourth quarter of last year and the hottest print in a year.

The price index for gross domestic purchases — prices paid not just by U.S. consumers but also businesses and government agencies — rose at a 3.1% annual rate, up from 1.6% in the final months of 2023.

That led investors to further push back their expectations of when the Federal Reserve might cut interest rates and a new spike in bond yields. Two-year U.S. treasury yields rose 0.05 percentage points Thursday morning to a hair below 5% (4.995% as of 10:30am ET, to be precise).

But we already had indications inflation had risen in Q1. Two weeks ago, we got a third straight monthly reading of 0.3% or above, and the 3-month annualized increase of CPI was around 4.5%. So why would a 3.4% bump-up in the PCE index change what we thought our situation was?

Seems pretty stupid, and given that oil prices have leveled off in the last month, I'm not overly concerned with inflation running away to a higher level. I think it'll be more likely that it heads back toward the 2-3% level that we were at since last Spring.

Wall Streeters are still trapped in a 1970s mentality where inflation is caused by a lack of capacity and that it somehow cripples everything else. In reality, a lot of this will likely be one-time factors and "greedflation" where corporations tried to reset prices at the start of the year to hit the quarterly profit numbers. But reality-based or not, it caused a selloff on Wall Street today, and likely guaranteed a very bad April for the market, which is annoying in its own right.

Your assessments are likely up, but your property taxes? It depends.

Given my geekdom on the subject, I’ve had a few friends and relatives ask me over the years about how property taxes get figured in Wisconsin for each parcel of property, and how it relates to their assessments. And given that you may have recently gotten a new property assessment for this year (as we did in Madison over the weekend), you might be especially intrigued right now.

Fortunately, Forward Analytics has put out a good explainer that lays out how a community’s total levy interacts with the assessments that individuals get.

A new report from #ForwardAnalytics, "Revaluation and Property Taxes: Do Higher Property Values Mean Higher Taxes?" explores the possible impacts that a municipal revaluation will have on individual property taxes. @Knapp_D13 @NACoTweets https://t.co/jrSptaX7JK

— WCA (@WisCounties) April 9, 2024

To begin with, let’s go with this one-sentence summary from FA.

The key to understanding the property tax bill is this: Your share of total assessed property value equals your share of the property tax.

That’s because state law requires all properties that reside in a certain taxing area (school district, municipality, county, etc.) to have the same “base” tax rate, which calculates the total gross property tax. Forward Analytics uses a cute scenario to explain it further.

A simple three house example (base scenario) illustrates why revaluations are needed when assessed values are out of sync with market values. The village of Badgerville has three residents: Ashley, Ben, and Carol, who each own a house. Ashley’s house is assessed at $200,000, Ben’s at $300,000, and Carol’s at $500,000. There is no other taxable property in the village, so the total assessed value in Badgerville is $1 million with the three residents owning 20%, 30%, and 50% of the total, respectively.

The total property tax levy in the city is $10,000. Recall that the share of total assessed values is the same as the share of total property tax. Since Ashley’s property is 20% of assessed values, she pays 20% of the levy or $2,000. Ben pays $3,000 (30%) and Carol pays $5,000 (50%). The left side of Table 1 on page 7 displays this situation.

While this “share” method is critical to understanding revaluations, property owners are more familiar with property tax rates. In this case, the assessed tax rate (tax per $1,000 of assessed value) is $10. Applying that rate to each property yields the same tax liability.

And then when property is revalued, and communities change their total tax levies, the taxes change proportionally.

You can see where Ashley’s property went up by 20%, but her taxes went down by $214 in the first scenario, and even as the total levy went up by $1,000 in the second scenario, the taxes she pays to her community still went down.

Why? Because Carol’s property value assessment went up by a higher percentage, and now takes up a larger chunk of the community’s property value. Carol’s taxes go up by more than the 10% that the total levy is going up by as a result.

I’ll take this down to my personal example for the house my wife and I own here in Madison. Our property assessment went up a little over 9% for this year (uh oh!) and the total citywide assessment of property values went up …a little over 9%.

Locally assessed real estate increased 9.3% for 2024. Commercial assessments increased 10.5% ($15,584 to $17,223 million) and residential assessments increased 8.5% ($25,826 to $28,021 million). Steady growth and continued development contributed to the increase.

So in theory, if the total property tax levy for Madison stays the same for this year vs last year (HAH! I kid!) this would means our property taxes paid to the city would also stay the same. Or if the city’s property tax levy goes up by 2%, our taxes should also go up by 2%, and so forth. It also likely means that our property tax rate will continue to go down (unless we get an increase in the tax levy of 9%!).

The frustrating part to me is not that we are paying higher property taxes than we were a decade ago. Higher costs that the city needs to cover and a lack of increase in state funding means that property taxes take on some of those extra costs – it happens. But we have to pay almost all of these additional property taxes in full, with very little allowed to be written off.

The maximum state tax credit for homeowners and renters has been frozen at $300 for 24 years, and on the federal side, the SALT exemption (which includes state income taxes and local property taxes in Wisconsin) has been frozen at $10,000 for joint filers since the GOP Tax Scam was put in place in 2017.

About the only break we get is that our increased school taxes give us higher School Levy and Lottery Tax Credits – a credit that the Wisconsin Policy Forum notes is regressive in nature, as people that have higher property values end up being the ones with a higher write-off.

These provisions will help hold the statewide property tax increase much closer to those seen in the years preceding the pandemic – likely about 2% to 3% – while allowing a healthy increase in local revenues. The school levy credit is distributed based on how much in K-12 property taxes is paid in each community. As a result, the increase in the credit will deliver the most benefit to communities such as Brookfield or Madison with high property values, since they tend to pay more in property taxes for K-12 schools.

Lawmakers could have placed the money for the credits into state general school aids instead, and doing so would have produced a similar statewide benefit for property taxpayers as a whole. The school aids formula, however, distributes more of this type of funding to communities with low property values per pupil. So that alternate approach would have sent more of the benefit to communities with low property values such as Beloit and Milwaukee.

It wouldn’t help us as much in Madison, but I’d rather trade more state funding being distributed into the general aids, and not having property taxes be as much of a basis in funding for K-12 schools overall. Seems a lot easier vs having these extra kickbacks and credits that aren’t needed. But those are policy debates that won’t have any changes passed into law before the next property tax bills come out in 7 1/2 months.

In the short-term, what I’d tell you is to remember that when it comes to property taxes, it isn’t as much the increase in your assessment that matters as how much you’re going up compared to everyone else in your community. Given that increases in property tax levies are still severely limited at the local level (barring referenda or a lot of new construction going online in 2024), that big jump in property value isn’t likely to mean a bunch of sticker shock when your property tax bill comes.

In almost all aspects, Wisconsin's finances are in great shape

Wanted to riff on a recent report from the Wisconsin Policy Forum on the state's strong fiscal situation. One positive side-effect of the state’s ongoing budget surplus is that there’s less of a need to take on debt. The Policy Forum notes that Wisconsin’s debt has plummeted over the last decade, and especially since 2017.

But some of that is due to paying bills that were put off by the Doyle and Walker Administrations as the state dealt with and recovered from the Great Recession. This meant that the state’s expenses going to pay off debt jumped in the rest of the 2010s, and only recently has declined to give the budget more breathing space.

In times of economic stress, however, the state is most immediately affected not by its total outstanding debt but by its annual debt payments, which can reduce the funds available for other spending priorities or put upward pressure on state taxes. The state has long sought to keep annual debt payments made with its main tax revenues, or General Purpose Revenue, to less than 4% of total spending to avoid crowding out other state priorities. (These figures are calculated using reports aligned with the state budget, not with the state’s comprehensive financial reports).

The state exceeded this target after it delayed making GPR debt payments during and immediately after the Great Recession from 2008 to 2012 to make it through those hard times (see Figure 7). That meant higher payments in later years. During the decade since, the state has been paying down GPR-funded debt and since 2017, it has largely avoided delaying these debt payments. Even during the chaotic pandemic, the state only delayed a relatively small part of its 2020 payment.

The result has been impressive. The share of GPR spending going to debt payments fell below 2.7% in both 2021 and 2022. With the exception of years in which the state skipped making debt payments because of budget challenges, that is the smallest share since 1984, according to the Legislative Fiscal Bureau (LFB) and Forum records.

One area that still has a sizable amount of expenses going to debt is in the state's Transportation Fund. Some of this has been mitigated in recent years with some of the General Fund surplus being used to pay for items in the Transportation Fund, and due to the borrowing spree of the Walker years ending in the last 6 years.

And with added infrastructure spending from the Feds starting to fade out in the next couple of years, it may be a good chance to see if there needs to be more funds sent over on the state level to further lower those debt payments in the Transportation Fund. And if so, will the General Fund surplus continue to be tapped to keep paying for that.

The Policy Forum notes that while the record bank balance is being reduced in this current budget, it is being done in a way that lessens the chances of future budget problems.

During the current 2024 fiscal year that closes on June 30, the state’s general fund is projected to spend nearly $3.3 billion more than it takes in from taxes and fees, according to LFB. As a result, the general fund balance (according to the cash-based accounting used for state budgeting) will fall from nearly $7.1 billion on June 30, 2023 to a projected $3.8 billion at the end of June 2024.

To some degree, spending down at least part of this sizable surplus can be seen as appropriate. Despite the drop in the general fund balance, the state’s rainy day fund will still retain an additional $1.8 billion to bolster state reserves. In addition, much of this new spending in 2024 is temporary or one-time in nature rather than permanent (such as expenditures for constructing and repairing state buildings). Also, the projected drop in the fund balance for 2025 is smaller at $551 million.

It also helps explain why it makes sense for Governor Evers to veto the $2 billion-a-year in permanent tax cuts that the GOP Legislature tried to get through. Because that would have taken away any ability to respond to an economic downturn, and would have put the state back into a deficit after we had finally gotten back to a solid fiscal situation.

We will find out in the coming weeks what tax season did for the state's revenue and overall budget for what is left in the 2024 Fiscal Year. So far the numbers have beem tepid, which is why the Legislative Fiscal Bureau had already reduced its revenue outlook back in January. But let's see if the big stock market gains of 2023 lead to a need for Wisconsinites to send in large amounts of tax payments in April 2024, which may help the state's bottom line, give expanded breathing room and perhaps allow us to continue on the right path going into the 2025-27 state budget.

Warm winter giveth to Feb home-building, and takes from it in March

One of the few items that made Wall Streeters give a temporary pause to the thought that interest rate cuts would get delayed was when home-building info showed a sizable drop in activity in March.

Privately‐owned housing units authorized by building permits in March were at a seasonally adjusted annual rate of 1,458,000. This is 4.3 percent below the revised February rate of 1,523,000, but is 1.5 percent above the March 2023 rate of 1,437,000. Single‐family authorizations in March were at a rate of 973,000; this is 5.7 percent below the revised February figure of 1,032,000. Authorizations of units in buildings with five units or more were at a rate of 433,000 in March.

Housing Starts
Privately‐owned housing starts in March were at a seasonally adjusted annual rate of 1,321,000. This is 14.7 percent (±9.9 percent) below the revised February estimate of 1,549,000 and is 4.3 percent (±9.4 percent)* below the March 2023 rate of 1,380,000. Single‐family housing starts in March were at a rate of 1,022,000; this is 12.4 percent (±12.5 percent)* below the revised February figure of 1,167,000. The March rate for units in buildings with five units or more was 290,000.

Housing Completions
Privately‐owned housing completions in March were at a seasonally adjusted annual rate of 1,469,000. This is 13.5 percent (±11.0 percent) below the revised February estimate of 1,698,000 and is 3.9 percent (±13.5 percent)* below the March 2023 rate of 1,528,000. Single‐family housing completions in March were at a rate of 947,000; this is 10.5 percent (±10.1 percent) below the revised February rate of 1,058,000. The March rate for units in buildings with five units or more was 502,000.

Whoa, are the high interest rates leading to further pullback in home construction?

I don't think so, because some of this seems to be a natural adjustment to new housing construction that was “pulled forward” in a warm February. Housing starts is a very good exampkle of this, with the 14.7% decline being a snapback from a 12.7% increase in February.

One red flag that I do notice is that we have the smallest number of total housing units under construction in over a year, despite having the most single-family units being built since last Spring. That's because housing projects of 5 or more units have had a sizable drop since last Summer.

There was a similar theme from the National Association of Realtors, as they reported that existing home sales fell in March.

Total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – receded 4.3% from February to a seasonally adjusted annual rate of 4.19 million in March. Year-over-year, sales waned 3.7% (down from 4.35 million in March 2023).

"Though rebounding from cyclical lows, home sales are stuck because interest rates have not made any major moves," said NAR Chief Economist Lawrence Yun. "There are nearly six million more jobs now compared to pre-COVID highs, which suggests more aspiring home buyers exist in the market."

Total housing inventory registered at the end of March was 1.11 million units, up 4.7% from February and 14.4% from one year ago (970,000). Unsold inventory sits at a 3.2-month supply at the current sales pace, up from 2.9 months in February and 2.7 months in March 2023.

"More inventory is always welcomed in the current environment," Yun added. "Frankly, it's a great time to list with ongoing multiple offers on mid-priced properties and, overall, home prices continuing to rise."

But if you take away February's numbers, the 4.19 million sales rate was also the fastest since May, and the 3.80 million in single-family sales was the fastest since March 2023. Looking over the last year, it appears sales got pulled ahead into February, and that the overall trend is moderate growth for the last 6 months after a decline in sales in the middle half of 2023.

It’s also intriguing that housing sales continue despite mortgage rates bouncing higher in the early part of 2024, as the prospects of a softer economy and a quicker start to Fed rate cuts began to fade. Let's see if that one continues for April.

I do find the trends of higher inventory and more completions and construction on single-family homes to be a good sign, as housing affordability is one of the few real headwinds in the current economy, and that's been compounded by the higher interest rates that exist in early 2024. But it's still nowhere near as good for potential buyers as it was 3 years ago, both in cost and interest rates, and while it's nice for millions of us to have large levels of housing wealth "banked", there still aren't a lot of places to turn to if we wanted to cash in those gains.

Wisconsin loses most jobs in U.S. in March??!! But Feb revisions show a strong Q1

Got a new Wisconsin jobs report for March this week. And not all that great, to be honest.

Place of Residence Data: Wisconsin's March 2024 unemployment rate held steady at 3.0%. The labor force decreased 3,500 over the month, to 3,140,000. The number of people employed decreased 800 over the month, to 3,047,100. The number of unemployed people decreased 2,600 over the month, to 93,000.

• Place of Work Data: Total nonfarm jobs decreased 1,700 over the month and increased 22,700 over the year, to 3,034,400 in March. Private sector jobs decreased 2,900 over the month and increased 14,300 over the year to 2,623,400. Construction jobs grew by 3,100 jobs over the month, to a record high 143,900 jobs.

The construction boom in Wisconsin and nationwide is a story that isn’t told enough, as nearly 8,000 jobs has been added in that sector in our state since October, and over 15,000 have been added since the start of 2022.

But as good as construction was for hiring, manufacturing employment was just as bad for losses, down by 2,900 in March, and over 5,000 below our post-COVID peaks. It also gave away much of the recovery that sector had been seeing for jobs since bottoming out last September.

Add in the loss of 1,800 jobs in warehousing and 1,300 jobs lost in Health Care and Social Assistance in a month when 2 hospitals closed in the Eau Claire area, and you get a bad month for March. Remarkably, Wisconsin was 1 of only 6 states that lost jobs last month, with our total loss of 1,700 being the largest drop in jobs out of any of those 6 states.

In looking at the reports from other US states, Wisconsin’s loss of jobs in March is in complete contrast to what happened in the rest of the Midwest, which had strong job growth in all of the other states in our part of the country.

Job growth, March 2024
Ill. +12,700
Minn +11,000
Ohio +11,500
Mich +6,100
Iowa +4,400
Ind. +4.100
Wis. -1,700

But I also looked back and noticed that February's job gain was revised up by 5,200 jobs, for a newly reported increase of 8,400 jobs in that month, and a total of 14,300 for the first 2 months of 2024. So perhaps March just reflects a correction to what is a still a strong 1st Quarter of job growth in our state.

We also haven’t seen much of an increase in unemployment claims in the state during April. In fact, Wisconsin had a drop of nearly 1,800 initial unemployment claims last week, the second-largest drop in new claims in the US. Continuing claims in Wisconsin declined by more than 2,100 the week before, and reversed an unusual increase for March.

If claims continue to decline for the last 2 weeks of April, I’ll think that March’s disappointing jobs numbers was a blip likely triggered by the closings of hospitals in the Eau Claire area, and a snapback from big numbers in a warm February that pulled forward some work that usually ticks up in Spring.

So I'm not going to worry too much about whether Wisconsin's strong job growth is suddenly reversing, unless the bad trend continues in April and May. We just need to keep trying to attract talent and expand our capacities, as we aeren't likely to get much further below the 2.96% unemployment we had last month.

US economy is doing too well? The Fed and Wall Street seem to think so

As 2023 ended, there were questions as to whether the strong US economy that we've been in for the last 3 years was going to continue. We'd seen softening numbers for both inflation and consumer spending growth, and even job growth had fallen off some in the later part of 2023.

But for the first three months of 2024, we've seen US job growth pick up and inflation bump up to its fastest 3-month increase since last Summer. And that's leading to some changes in outlook. For example, International Monetary Fund said this week that the US is going to outpace the rest of the developed world in economic growth this year.

The IMF revised its forecast for 2024 U.S. growth sharply upward to 2.7% from the 2.1% projected in January, on stronger-than-expected employment and consumer spending. It expects the delayed effect of tighter monetary and fiscal policy to slow U.S. growth to 1.9% in 2025, though that also was an upward revision from the 1.7% estimate in January.

European Central Bank President Christine Lagarde has cited the stark divergence between the U.S. and Europe, which is facing slower growth and faster-falling inflation.

The latest IMF forecasts bear this out, with a downward revision to the euro zone 2024 growth forecast to 0.8% from 0.9% in January, primarily due to weak consumer sentiment in Germany and France. Britain's 2024 growth forecast was revised down by 0.1 percentage point to 0.5% amid high interest rates and stubbornly high inflation.

Soon after that IMF report came out, we got confirmation that US consumer spending in America was robust for the 1st Quarter of 2024, coming in above what the "experts" were predicting.

U.S. consumer continued to spend freely in March.
Retail sales rose 0.7% m/m (consensus 0.4%) following upwardly revised 0.9% (from 0.6%) in Feb.
Ex autos, retail sales surged 1.1% m/m (consensus 0.5%) following upwardly revised 0.6% increase (from 0.3%) in Feb. https://t.co/TtuAHQsj50 pic.twitter.com/ztGnB7U22B

— Traders Community (@TradersCom) April 15, 2024

This strong economic performance and outlook led Fed Chair Jerome Powell to say this week that interest rate cuts are going to come later in 2024, if at all.

Federal Reserve Chair Jerome Powell cautioned Tuesday that persistently elevated inflation will likely delay any Fed interest rate cuts until later this year, opening the door to a period of higher-for-longer rates.

“Recent data have clearly not given us greater confidence” that inflation is coming fully under control and “instead indicate that it’s likely to take longer than expected to achieve that confidence,” Powell said during a panel discussion at the Wilson Center.

“If higher inflation does persist,” he said, “we can maintain the current level of (interest rates) for as long as needed.”…

In the past several weeks, government data has shown that inflation remains stubbornly above the Fed’s 2% target and that the economy is still growing robustly. Year-over-year inflation rose to 3.5% in March, from 3.2% in February. And a closely watched gauge of “core” prices, which exclude volatile food and energy, rose sharply for a third straight month.

As recently as December, Wall Street traders had priced in as many as six quarter-point rate cuts this year. Now they foresee only two rate cuts, with the first coming in September.

Not great if you're a borrower, or if you were anyone else counting on interest rates dropping from their 23-year highs. It's also spooked the stock market, which has seen all of the gains of the first three months of the year go away in April, as the odds for rate cuts have declined.

I'm not going to complain about increased job and consumer spending growth, and you shouldn't either. Unless inflation stays at or above a 4% annual rate for the next 3 months, there's not much that's going to cause real concerns in the actual economy. I'd still argue that our current rates are too high and are making the market for single-family homes even tighter than it already was, but I'm also starting to accept the reality that those rates won't go down any time soon. So adjust and invest accordingly.