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These days, someone talking about a double-dip isn’t ordering ice cream. A double-dip is the dolorous possibility that the economy will slump again, after staging a very modest, government-goosed recovery from the worst downturn since the Great Depression. It’s possible that any double-dip will only affect housing. But in the worst-case scenario, another housing crash could lead the entire economy into the tank again.

Warning: San Diego is not immune. It’s true that home prices in San Francisco, San Diego, San Jose, and Los Angeles, although coming back only moderately, have done better than prices in most of the rest of the country. However, as we will see below, part of that is a statistical mirage. Also, there are some suggestions that home values in the California coastal metro areas are dropping again, an indication that the country could fall into that housing double-dip.

First, the backdrop. Nationally, new and existing home sales are plunging, even though mortgage rates have been pushed to record lows. However, Standard & Poor’s/Case-Shiller numbers indicate that home values in the 20 largest markets rose 1 percent in June from May and 4.2 percent from a year earlier. San Francisco and San Diego recorded the best annual gains, and Los Angeles came in fourth, although their June growth rates were down sharply from their May advances.

San Diego’s home-price recovery isn’t quite what it seems, say economists. “The mix of sales has changed dramatically,” says Alan Nevin, director of economic research of MarketPointe Realty Advisors. “When we had our first big round of sales, they tended to be the cheapest homes — say, foreclosures for $100,000. But now we’re not getting as many foreclosures,” and higher-priced homes are a larger percentage of sales, lifting the average prices.

San Diego home sales plunged 19.4 percent in July compared with a year ago, according to data from MDA DataQuick, but prices went up 5.6 percent. Says Nevin, “I suspect that resales this year won’t be as ebullient as last year because of the falloff in foreclosures.”

New York City’s Radar Logic has tracked this phenomenon statistically. From June of last year to June of this year, San Diego home prices went up 5.7 percent. But a year ago, sales of foreclosed homes were 33 percent of all sales. Now they are running 27 percent. Actually, if you drop out homes sold by banks (foreclosures), San Diego prices declined by 1.4 percent over the 12 months that ended in June, says Quinn Eddins, director of research. The same was true in San Francisco and San Jose.

Ominously, between May and June of this year, the average of all San Diego prices declined by 0.9 percent, according to Radar Logic numbers, which don’t jibe with Standard & Poor’s calculations. “Normally, the percentage goes up that time of year,” says Eddins. “This shows us there is underlying weakness. San Diego and the other California markets tend to be bellwethers for our composite of 25 municipal areas. We are seeing price declines earlier than usual.”

Eddins thinks that the data from Standard & Poor’s/Case-Shiller is misleadingly optimistic, and actually, so do the economists who put out those numbers. The Standard & Poor’s numbers include transactions occurring over a three-month period. Hence, they still reflect the positive effect of the federal stimulus program. Once the effect of that stimulus disappears from the statistics, prices could flatten or retreat, say those compiling the S&P/Case-Shiller numbers.

Eddins fears that weak demand and rising supply may lead to a housing double-dip across the nation. “The home-building industry is an important source of employment, particularly in Southern California,” says Eddins. “The fact that home prices are dropping doesn’t suggest home builders will ramp up production. People are still deeply underwater.” (That is, there is more debt on their homes than they are worth.)

San Diegan Robert Campbell, who publishes The Campbell Real Estate Timing Letter, computes a “Real Estate Crash Index.” In August of 2005, his index correctly flashed a sell signal on San Diego real estate. In May of this year, the index flashed a buy. But he doesn’t think the good days will last long. “It is really getting scary in San Diego,” says Campbell. “San Diego is one of the three strongest markets [in the United States], but it is losing momentum. The recovery was artificial, driven by government stimulus. There was a temporary bounce in the market, but it will start heading down.”

There are stark differences among neighborhoods, says Nevin. “From Carmel Valley all the way to Carlsbad, home prices didn’t even drop 10 percent,” he says, while at one point countywide prices were down more than 40 percent. They are still down 34.6 percent from the late-2005 peak. “In eastern Chula Vista, prices dropped 50 percent.” Around the county, vacancy rates in single-family rental homes are 1 or 2 percent: “People are buying foreclosed homes and renting them out,” he says.

Oceanside’s Hanley Group follows new home sales in 115 development tracts throughout the county. “Sales dropped like a stone in mid-June and haven’t come back,” says Sharon Hanley, who heads the company. Now there are 1.25 home sales per month in those 115 tracts; back in the halcyon days of 2004 to early 2006, sales were running at 7 a month. “I wouldn’t look for any comeback until after the first of the year; then it will be very, very limited,” she says. She sees some strength in the Carmel Valley, La Costa, and Oceanside areas and very moderate activity in South Bay, but weakness in East County, where there isn’t much on the market.

“It is slow,” says Peter Reeb of Reeb Development Consulting. However, he feels, “We have seen the worst of it. I don’t think there will be a double-dip in the new home market.” New home prices dropped 30 percent from peak to trough, but certain factors indicate sales won’t start dropping again. “The supply of housing is at its lowest level in over 30 years. On a project-by-project basis, sales have been rising for more than a year. In the second quarter of this year, prices were up 1.5 percent. This creates a sense of urgency among buyers. The sense of urgency and scarcity provides support for the market.”

But if that sense of urgency evaporates, San Diego could be in for trouble. A mild housing downdraft might not do much damage, but a second drop of 10 to 20 percent could lead to a double-dip in the overall economy.

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SurfPuppy619 Sept. 8, 2010 @ 2:41 p.m.

Jobs control housing, spending, tax revenue, and everything in between.

No jobs, no recovery.

We have no jobs. Story over.

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Don Bauder Sept. 8, 2010 @ 3:24 p.m.

Response to post #1: With consumer spending representing more than 70% of GDP, you have a good point. It is true, however, that expenditures by the top 10% in wealth can stimulate the economy while other spending goes down. It's not a big offset, however. Best, Don Bauder

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SurfPuppy619 Sept. 10, 2010 @ 8:58 p.m.

I was walking through my planned developement today and noticed two new REO's, the grass was dying off b/c the water is shut off and the banks make no attempt to take care of the property.

We have been in the real estate toilet for 3 full years now and homes are still being foreclosed on. It is not improving.

Real Estate Sales are down in all major metro areas in CA.

I predict that this will continue on for 2-4 more years. Maybe longer. The reason-no jobs, no job creation. Our tax base has been shipped over seas.

Governments are making the mess much, much worse, both local and state-as well as federal- they have NOT done a thing to cut spending, no salary cuts, no benefit cuts, nothing. This strains the entire social fabric of the local, state and national commmunities.

We are heading for a break down the kind this nation has never experienced or seen before IMO, at least in modern times.

I predict Obama is going to be a one term president b/c he is just not getting the job done, and the bailouts of the gov workforce-a workforce that is already far ahead of the private sector in pay, benefits, job security and everything else- is going to be the final straw. Poor and middle class (not much left of the middle class) private sector employees are footing the bills for these multi million dollar gov pensions-and that is not sitting well with the public.

I voted for Obama, had high hopes him, and will give him a full 4 years before I vote him out of office. He better hope things start improving real fast though, b/c he only has about 18 months left before it is too late IMO. These first 2 years have been a big- no HUGEEEEEEE- disappointment to me, because of the hope I had. Very much like Arnold-I had such high hopes and have been let down in a big way.

We simply do NOT need to be bailing out Wall Street scammers and state gov's.

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Don Bauder Sept. 10, 2010 @ 9:46 p.m.

Response to post #3: You've forgotten, SP, that the major bailouts were George W. Bush's doing, and this Great Recession started on his watch, partly because he encouraged debt/consumption and cut taxes of the superrich while the middle class evanesced. Yes, Obama is a disappointment in many respects, but he inherited an horrendous mess. It amazes me that people forget that this financial firestorm started under Bush and was a result of three decades of greed, debt, and economic policymakers who did not see that a disaster was building. Best, Don Bauder

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Don Bauder Sept. 11, 2010 @ 5:19 p.m.

Response to post #5: That's tellin' 'em, Burwell! Best, Don Bauder

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SurfPuppy619 Sept. 15, 2010 @ 8:33 a.m.

You've forgotten, SP, that the major bailouts were George W. Bush's doing, and this Great Recession started on his watch, partly because he encouraged debt/consumption and cut taxes of the superrich while the middle class evanesced. Yes, Obama is a disappointment in many respects, but he inherited an horrendous mess

Booshieee gets no free pass from me, he is worse in my book.

I have in the past stated that Boooshiieee is probably the worst president of the last 100 years IMO. I still think that-his invasion of Iraq was cerainly a play for oil-and his lie that the "war wouls pay for itself" goes down as one of the biggest whoppers in presidential history.

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SurfPuppy619 Sept. 15, 2010 @ 7:33 p.m.

That's tellin' 'em, Burwell!

What did B say??? His comment is gone!

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shmoov_groovzsd Sept. 16, 2010 @ 1:31 p.m.

"Since the collapse happened on the watch of President George W. Bush at the end of two full terms in office, many in the Democratic Party were only too eager to blame his administration. Yet while Bush did nothing to remedy the problem, and his response was to simply reward the culprits, the roots of this disaster go back much further, to the free-market propaganda of the Reagan years and, most damagingly, to the bipartisan deregulation of the banking industry undertaken with the full support of "liberal" President Clinton. Yes, Clinton. And if this debacle needs a name, it should most properly be called "the Clinton bubble," as difficult as it may be to accept for those of us who voted for him."

http://www.huffingtonpost.com/robert-scheer/the-great-american-sticku_1_b_715952.html

This is for all Bush finger pointers out there. Read this interesting point of view illustrating the grand scheme here and a failed economy just didnt happen overnight.

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Don Bauder Sept. 16, 2010 @ 1:43 p.m.

Response to post #7:Agreed. George W. Bush (a.k.a. Dick Cheney) was a horrible president. Best, Don Bauder

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Don Bauder Sept. 16, 2010 @ 1:45 p.m.

Response to post #8: I have no idea what Burwell meant to say or why he hasn't come back to explain what happened. Maybe he was playing a joke on us that we were too dense to get. Best, Don Bauder

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Don Bauder Sept. 16, 2010 @ 1:48 p.m.

Response to post #9: Good points. The deregulation of banking came under Clinton, and a leading advocate was Larry Summers, now on the White House team. The roots of the current mess go back much further than W. Best, Don Bauder

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SurfPuppy619 Sept. 16, 2010 @ 4:51 p.m.

This is for all Bush finger pointers out there.

By shmoov_groovzsd 1

The finger pointing goes to pretty much all of the idiots during the last 50 years, from kennedy on forward.

But the fact is at oleast under Clinton we had a budget SURPLUS. The meltdown happened on Boohhiees watch, at the end of his term, he certainly has to take the blame for the majority of it.

IMO Alan "Mr Bubble" Greenspan is the one most responsible for the meltdown.

But the leverage, and the deregulation, on Wall Street are two other major factors.....

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Don Bauder Sept. 19, 2010 @ 8:26 p.m.

Response to post #13: Excessive consumer, government, banking and corporate leverage has been growing for decades. The tax cuts for the superrich, which exacerbated the problem, came for the most part during Republican administrations, starting with Reagan. Best, Don Bauder

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Twister Sept. 21, 2010 @ 1:01 p.m.

Ok, I pretty much agree with everything said so far, but with respect to President Obama, I'd like some substantiation, if any, of the following rumors.

  1. Obama is a hand-picked creation of hypermanipulators of public opinion who put the best of Madison Avenue to shame.

  2. Obama endorsed, in a White House meeting with Bush and an unnamed bunch of co-conspirators, the first bailout. Details?

  3. Obama followed up with yet more bailouts, direct and indirect, rather than recognizing that the super-rich would just stash the money offshore, use it to buy companies, yachts, and otherwise "stimulate" the economy of the super-rich, which, while it sucks money from below, does all it can to keep it from trickling down (to "Main Street" and below).

  4. Obama is either intentionally tone-deaf or has some strategy he won't talk about.

  5. He is intentionally boring us to tears with speeches that bear little resemblance to those of this campaign.

  6. He has delivered on more of his campaign promises than could reasonably be expected under the circumstances of a grid-locked Congress.

  7. He will be replaced by a boob-team that will make the Boo-Boob-er-Boosherionos look like Whiz Kids.

  8. The only thing that can save the economy is a crash, from the ashes of which a Great Bird will flip up and lay goose-eggs that will bring 12-cent an hour jobs back to US.

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Don Bauder Sept. 21, 2010 @ 3:27 p.m.

Response to post #15: I'll respond to numbers two and eight. There was nothing secret about the meeting at which Obama endorsed the Bush bailouts. McCain was there, too, and also endorsed the bailouts, although I have always suspected McCain intended to oppose them, but then was told how grave the situation was, and went along. I don't think a crash will save the economy. However, I will say this: key contributors to the economy, such as consumers, are deleveraging, or getting rid of their debts. This is good in the long run but bad in the short run. The federal government and Federal Reserve are trying to get consumers -- and corporations and banks and governments -- to add more leverage. It is the wrong thing to do -- for the long term. Best, Don Bauder

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David Dodd Sept. 21, 2010 @ 4:06 p.m.

Re #15: I'll respond to number one. All Presidents are selected in that way. Each party does exactly what you described. POTUS has very little power to affect any real change, by design, except to go to war and veto bills. The President's handlers are puppets on the strings of the country's most powerful and wealthy. These elite do not care much about party affiliation, only the successful manipulation of powerful lawmakers in Congress. POTUS is nothing more than a mouthpiece that successfully disguises that process.

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SurfPuppy619 Sept. 21, 2010 @ 4:42 p.m.

POTUS is nothing more than a mouthpiece that successfully disguises that process.

Although I do agree with refriedon 90% of hsi post-I do not think the POTUS is a mouthpiece.......but special interest does run the country-and is ruining it with their greed.

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SurfPuppy619 Sept. 21, 2010 @ 4:45 p.m.

However, I will say this: key contributors to the economy, such as consumers, are deleveraging, or getting rid of their debts. This is good in the long run but bad in the short run.

Do you call 2014 the short run??

Because that is the earliest we will pull out of this mess........ay least that is my guesstimate.

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Don Bauder Sept. 21, 2010 @ 5:16 p.m.

Response to post #17: Wall Street selects and finances the winning presidential candidate and Madison Ave. provides the hype. But remember: Wall Street selects and Mad Ave. hypes the losing candidate, too. The president is not a puppet. He/she has a bully pulpit and can affect the nation's direction profoundly. Best, Don Bauder

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Don Bauder Sept. 21, 2010 @ 5:18 p.m.

Response to post #18: The problem is that the president feels he/she must reward his/her financial supporters. Best, Don Bauder

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Don Bauder Sept. 21, 2010 @ 5:20 p.m.

Response to post #19: The short run is the next election or two -- through, say, Nov. of 2012. The year you cite, 2014, is the intermediate term. Best, Don Bauder

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Twister Sept. 21, 2010 @ 5:23 p.m.

Again, I tend to agree with all. As to the crash, it will not save THIS (certainly not the delusionary or bubble-) economy, but it might be worth it if the crash wipes out enough of the top one percent to get their attention and put the world on notice that frugality and efficiency, rather that limitless profit and waste, especially marginal increments of profit gained at great cost to others and to resources, is the law of nature which even they, in their arrogant, narcissistic, deluded "omniscience," can't evade forever.

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Founder Sept. 21, 2010 @ 5:28 p.m.

Reply #19/SP

If, and I again say IF, we are actually in recovery in 2014, then the Middle Class as we used to think of it, just a few years ago, will be only a fond memory for most of the new "POOR" and their families.

and

"Remember the Middle Class" will used as a rallying cry by them...

I see much "darker" times ahead for everyone not in the top 20% income bracket and I'm tempted to make that the top 10% income bracket...

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SurfPuppy619 Sept. 21, 2010 @ 7:40 p.m.

I see much "darker" times ahead for everyone not in the top 20% income bracket and I'm tempted to make that the top 10% income bracket...

You are on target. The dark times are here, and it is not looking up for anyone except for the top 1/10th of the top 1%.

They had an interview in the LA Times yesterday with a 55 year old machinest (skilled manual labor in a profession that should have many job openings) who had been out of work for 2 years-when this meltdown started. He thinks (actually is scared to death) there is a good chance he will never work again.

Even though this guy was skilled manual labor, he was making a modest $500/week, or $25K per year. If our country cannot support skilled manual labor paying a modest $25K per year then the country is doomed, and I mean DOOMED. We just won't survive.

(and this is especially true when GOV EMPLOYEES in semi skilled manual labor jobs, like cop and FF, are comping 8 times that $25K)

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Don Bauder Sept. 21, 2010 @ 10:48 p.m.

Response to post #23: If someone worth $2 billion gets hit by the crash and drops to $1 billion, he or she is still much better off than someone who suffered a smaller percentage loss but whose net worth is much lower. Best, Don Bauder

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Don Bauder Sept. 21, 2010 @ 10:50 p.m.

Response to post #24: I see several years of very meager growth and continued high unemployment and underemployment. The middle class will continue to contract. Best, Don Bauder

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Don Bauder Sept. 21, 2010 @ 10:52 p.m.

Response to post #25: Automation has killed many such jobs and the exporting of those jobs to low-wage nations has also hurt. Best, Don Bauder

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nan shartel Sept. 21, 2010 @ 11 p.m.

the American worker has become sadly obsolete

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Don Bauder Sept. 22, 2010 @ 8:20 a.m.

Response to post #29: Market forecasters and economists focus on such data as factory utilization rates when manufacturing is such a small part of the economy now. Best, Don Bauder

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Twister Sept. 28, 2010 @ 5:54 p.m.

You're right about the "bully-pulpit," but I suspect you are wrong about a president feeling beholden to (big-time) "supporters." Conspiracy theories are theories because these megalomaniacs don't follow movie scripts, they are VERY quiet and careful about how they operate. Let's just say that it would be a rare president who would put his innocent children and wife (not to mention family and friends) at risk by getting too truthful.

Even at the lowly level at which I used to work, this is the way it's done, even by the low-level goons. The earth is beautiful, if unforgiving, even indifferent, but the world is vicious and asocial.

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Founder Sept. 28, 2010 @ 7:08 p.m.

25 - #31

The first step in dealing with a problem is identifying the problem exists and not giving in to to denial!

America is now still in denial about the size of our fiscal problem and until our Leaders accept that, the middle Class will continue to shrink in ever larger numbers (think exponentially).

America's greatest "business" is innovation and in the future, I expect to see many more other Countries hiring Americans to telecommute to off shore "think tanks" on an as needed basis (low wages and preformed by self employed folks without benefits)...

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Don Bauder Sept. 28, 2010 @ 11:16 p.m.

Response to post #31: Good observation: the earth is beautiful but the world is vicious. We evolved from hungry, vicious creatures. What did you expect? Best, Don Bauder

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Don Bauder Sept. 28, 2010 @ 11:18 p.m.

Response to post #32: The middle class is shrinking, but not to a great extent because of bad fiscal policy. It is shrinking because of private sector greed. Best, Don Bauder

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Founder Sept. 29, 2010 @ 8:04 a.m.

Reply #34 Isn't the "private sector greed" also responsible for the "bad fiscal policy" as our Leaders cave-in to their Large Supporters?

From what I see, the Private Sector is just trying to emulate the Wealthy as they all grasp for the "golden ring" to get yet another "free ride"...

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Don Bauder Sept. 29, 2010 @ 9:37 a.m.

Response to post #35: Yes, those factors are related, particularly when it comes to tax cuts for the superrrich. Best, Don Bauder

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Twister Oct. 2, 2010 @ 9:29 p.m.

Re 33:

Or we evolved INTO greedy, vicious creatures. Now the challenge for this "superior" brain is to figure out how to save our greedy asses from ourselves.

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SurfPuppy619 Oct. 2, 2010 @ 11:01 p.m.

Isn't the "private sector greed" also responsible for the "bad fiscal policy" as our Leaders cave-in to their Large Supporters?

Large Supporters= Special Interests

And yes, that is the problem/s

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SurfPuppy619 Oct. 2, 2010 @ 11:04 p.m.

The middle class is shrinking, but not to a great extent because of bad fiscal policy. It is shrinking because of private sector greed.

Private sector greed= special interests= drives bad public and fiscal policy.

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Don Bauder Oct. 2, 2010 @ 11:26 p.m.

Response to post #37: I think we emerged from the jungle and haven't made any progress since. But your theory may be a good one, too. Remember, though, that many cultures are not as greed-obsessed as our own. Best, Don Bauder

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Don Bauder Oct. 2, 2010 @ 11:27 p.m.

Response to post #38: Public sector greed is a big part of our problem, too. Nobody knows that better than SP. Best, Don Bauder

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Don Bauder Oct. 2, 2010 @ 11:29 p.m.

Response to post #39: Again, don't forget public sector greed. I didn't think I would have to tell you that, SP. Best, Don Bauder

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