Homes Group Magazine - Issue 16

ISSUE 16

IS THE BUBBLE G O I N G TO

TH S SSUE 4-5 6-9 10-11 12-13 14-15 16-17 18

Holmes on Homes Featured Homes Is the bubble going to burst?

Home & Style Current Listings Q&A Crossword & Sudoku

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HOLMES ON HOMES What in the world is going on with real estate in the Twin Cities?? This is the hottest market I’ve seen in 20 years of practice but the better question to ask is: What comes next?!

You’ve heard me say it for years and I write about it constantly – low inventory, shortage of listings, where’s all of inventory? Well.. let’s toss in Covid and historically low interest rates and take this conversation for a spin and it gets a bit crazy. We’re going to analyze the market and try to answer the question of “What’s next?”

You all know I’m a stat geek. Serve me up a bowl of numbers with my cheerios in the morning and I’m a happy guy. So let’s look at the market in a context of 15 years and then down to the nitty gritty of the last 5 years and specifically this year. Hang in there.. sounds like a lot but I promise to make it easy.

Supply vs. Demand = Price. Basic stuff, right. So let’s take a look at the last 15 years of those concepts in our Twin Cities MLS. See Figure 1 – Supply. We’ve had a steady decrease in supply for the last 5 years and technically the last 12 years but I believe the supply we saw in 2012-2015 is about normal. And then comes covid and drops it even farther.

See Figure 2 – Demand. This charts closed sales over the same period or in other words- Demand. The demand has been pretty steady over the past 5 year and overall we’re at a peak of demand in context of the last 15 years.

See Figure 3 – Price. Well of course this chart looks this way. The bottom of the market was 2012 which was an imbalance of available 4

Joseph Holmes

homes and not many buyers. Since then it’s been rising at warp speed!

Demand grew and is now at a 15 year peak. At the exact same time, inventory is at an ALL TIME low and dropped again this year due to covid. This is nuts!! So let’s dive into this year and a try to take a look at a close up this 10,000 foot view.

As I write this, it’s October 9th and I’m going to use stats for this week in comparison to this SAME week in 2019,18, 17 and through 2015. A five-year history of THIS week in time. We’re going to look at Active Listings & Pending Listings to get an idea of supply vs. demand. Take a look at this chart and tell me what you think: Year

Current Listings

New Pending Listings

2015

13,652

994

2016

11,108

970

2017

9,513

995

2018

9,785

1,020

2019

9,416

857

2020

6,722

1,422

So let me break it down as simple as possible to get the point across. In this 41st week of the year -October 7th vs. what we had just 5 years ago at this point in time - There are 51% less listings with a 43% increase in sales volume.

And you want to know what comes next?!? Yeah – so do I. We’ll continue this on page 9 – Is the Bubble Going to Burst?

Keller Williams Premier Realty

Figure 1

Homes for Sale

Twin Cities Region

35K

30K

25K

20K

15K

10K

5K 1-2005 1-2006 1-2007 1-2008 1-2009 1-2010 1-2011 1-2012 1-2013 1-2014 1-2015 1-2016 1-2017 1-2018 1-2019 1-2020 Twin Cities Region Each data point is 12 months of activity. Data is from October 8, 2020.

All data from NorthstarMLS. Data deemed reliable but not guaranteed. InfoSparks © 2020 ShowingTime.

Joseph Holmes

Figure 2 Premier Realty Keller Williams Closed Sales

Office: 651-379-1581 joeholmes@kw.com www.holmesgroupmn.com

Twin Cities Region

65K

60K

55K

50K

45K

40K

35K 1-2005 1-2006 1-2007 1-2008 1-2009 1-2010 1-2011 1-2012 1-2013 1-2014 1-2015 1-2016 1-2017 1-2018 1-2019 1-2020 Twin Cities Region Each data point is 12 months of activity. Data is from October 8, 2020.

All data from NorthstarMLS. Data deemed reliable but not guaranteed. InfoSparks © 2020 ShowingTime.

Joseph Holmes

Figure 3 Premier Realty Keller Williams

CALL ME TODAY! 651-491-2151

Office: 651-379-1581 joeholmes@kw.com www.holmesgroupmn.com

Median Sales Price $300K

Office: 651-379-1581 joeholmes@kw.com www.holmesgroupmn.com

Twin Cities Region

$275K

$250K

$225K

$200K

$175K

$150K

$125K 1-2005 1-2006 1-2007 1-2008 1-2009 1-2010 1-2011 1-2012 1-2013 1-2014 1-2015 1-2016 1-2017 1-2018 1-2019 1-2020 Twin Cities Region Each data point is 12 months of activity. Data is from October 8, 2020.

All data from NorthstarMLS. Data deemed reliable but not guaranteed. InfoSparks © 2020 ShowingTime.

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FEATURED HOMES OFF MARKET POSSIBILITY

11660 Irish Ave N, Stillwater MN 55082 Custom designed and built by Charles Cudd, this home is over 6,000 square feet of luxury. Well thought out one-story design with an abundance of amenities & privacy. Detached 2nd garage for toys and tools, lower level bar and theater room, private gazebo on your own island – yes, your own island. Brilliant use of space with open concepts, timeless finishes and truly a must see.

Call for more details and availability.

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COMING SOON

20019 Fern Glen Lane N, Forest Lake MN 55025.

With 5 bedrooms and over 3,000 square feet, this 2-story home is impressive. Built in 2013 and still enjoys the feel and finish of new construction. The lower level is finished with built-in entertainment, accent walls and bar. The main floor is an open concept and features a mud room off the garage, center island & pantry in the kitchen, bonus room for home office or kids play area. 4 bedrooms on the upper floor with an impressive master suite.

Call for more details and availability.

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FEATURED HOMES

11433 Kingsborough Trail, Cottage Grove MN 55116 $849,000 | 5,112 sq ft This is seriously the best buy in the Twin Cities. With over 5,000 sq ft and 1.5 acres of pristine gardens, landscaping and views this home is priced at $166 per square foot. The cost of new construction will range from $200-$300 per square foot and comes with postage stamp-sized lots. This is THE deal of the Twin Cities.

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Wine Cellar with stone façade wall and mocular bottle storage. Prepped and setup for wine refrigeration.

Golf Course Living – located on the 2nd Fairway of the River Oaks Golf Course

Wet Bar with cherry wood & granite finishes and complete with all kitchen utilities – fridge, freezer, dishwasher, disposal, ice maker, electric cooktop & wine cellar. Smart Home integrated features with home security and AV.

CALL US TODAY! 651-379-1581

New construction doesn’t compare to this luxury home with timeless design and endless amenities. A golf course lot and views of the Mississippi River with 1.5 acres combine with 5,112 sq ft and 2,400 sq ft 2-story garage. This boasts enough space for just about any toy, tool or shop needs. Barrell vaulted entry, 13’ soaring ceilings, floor to ceiling windows, heated garages, open living spaces and more.. this home is stunning and a MUST SEE! 9

IS THE BUBBLE G O I N G TO

S

o going back to wonderfully written and poignant article Holmes on Homes – we have a clear understanding of what we’re looking at – a crazy shortage of listing inventory and very strong demand creating a very high priced market. So what happens next?

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To be quite honest, I don’t know and nobody really does.

We can talk over the factors that will create change so in watching those, you’ll be able to better predict what will indeed happen next. With that, here are a few concepts or indicators to watch: LISTING INVENTORY Starting with the age-old soap box. Where’s the inventory!

You saw a drop in inventory from 2015 to 2017 and then it steadied out around 9,500 listings. 2020 chaos ensued and we’re down to 6,500 listings. So what happens when the chaos ends: election is over, vaccine and better treatments for covid and if we can find a way to all play nice in the sandbox together – people will be more comfortable selling their home. So the shadow inventory of people waiting for 2020 to be in the rearview is out there. If we go back to 9500 listings next spring.. watch out. This is nearly 50% more than what we have now and exactly what we did have in 2019 so it’s plausible it’ll go higher than that with the shadow inventory waiting.

INTEREST RATES When we work with buyers, I ask a question in reverse order.

Instead of asking a client the price range they are looking in – I ask instead “What is your goal or comfort level for a monthly payment?” The reason I ask that is when buying a home – it’s rarely done in concept of overall price but instead what the monthly payment will be. We have historically low interest rates at 2.75% for a 30 year fixed! This means more buying power. $100,000 at 2.75% over 30 years = $408/mo.

So does it matter when a buyer has to go $25,000 over list price to secure a home – not too much as it’s only $100/ mo. If you’re shopping at $500,000.. thinking of a $600,000 price is relatively doable as it’s only $400/mo. This allows appreciation to go through the roof. And it has! So what will happen when interests go up. What happens when we see 3.75% as a rate? What about 4%. Taking away buying power WITH increased inventory – pop!

NEW CONSTRUCTION Where does new construction play into this? Great question.

I see it as the ultimate balancing act between existing construction and demand. Of course there’ll always be people that gravitate towards a new home but with an inventory shortage and great rates, new construction volume is off the charts. So what to watch for – that balancing act. The cost of new construction has skyrocketed. The cost of lumber has gone up 30% - 40% in the last 5 months alone. Combine that with wildfires out west, shortage of skilled labor and you

have a recipe for inflated new construction prices. As those prices grow – existing homes will look more attractive. If those costs even out a bit, people will still head this direction.

It’s no doubt a balancing act.

FORECLOSURE Yup..I just dropped the f-bomb. Can it come back? Will it be allowed to come back? This is difficult to really know. There are plenty of homeowners that are on hard times due to Covid. So what happens with those mortgages that will be in default because of this? What happens to the mom’s and pop’s investor out there with a tenant that’s not paying rent because they’re furloughed or they’ve been laid off and they can’t evict them. What’s the consequence to all of the rent and mortgage not getting paid due to a global pandemic?

Will there be government intervention to offset this? Will there be loan forgiveness or balances put on the back-end of the loan? Given our government and how things are going – let’s just say this concept could get interesting but certainly watch for this inventory as a possibility in the months and year ahead.

So do we have a bubble.. Hmm, does a bear shit in the woods? We do but it’s size and scope is really based on price, geography and style of home.

Take for example a home we sold recently in White Bear Lake – 2347 Dorothy Ave. One story, nicely remodeled, a little over 2,000 sq ft. If we would have listed that in January 2020, I would have suggested $325,000. We listed that in May at $349,900 and it sold a month later at $376,000. That’s a bubble!

The other end of the conversation is our listing at 11433 Kingsborough Trail in Cottage Grove. We’ve been working on this listing for 3 years. We started that listing in September of 2017 at $895,000. Today we’re priced at $849,000. We’ve had more activity in the last 3 months on this listing than the previous 2+ years combined. That’s certainly not a bubble but the current market has put that home IN the market to sell. And it will! By the way.. go see that home. Seriously it’s the absolute steal of the Twin Cities.

In between those 2 examples are 1,000’s of homes and markets and it’s evident that the lower price on that spectrum, the more possibility of a bubble. Will it pop? Will it burst? Or simply deflate and level off? I don’t know but I’ll be watching all the pieces to this puzzle in the months ahead and I suggest you should too! Or you can just call me for the cliff notes version anytime!

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HOME & STYLE

This new home in southwest Minneapolis houses two condos. The building was designed to blend into the neighborhood.

New southwest Minneapolis house is actually two $1M-plus condos

R

eady to downsize from your single-family home and ditch all the yard work that comes with it?

But maybe you’re not quite ready for a 55-plus building with long hallways.

You’re the target market for a pair of new condos inside what looks like a single-family home in Minneapolis’ Fulton neighborhood, just a few steps from 50th and France.

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Citiliving Homes built the urban contemporary structure at 50th and Ewing Avenue S., where a small 1920s bungalow once stood. The bungalow was a rental property that hadn’t been updated and was “substandard for the neighborhood,” said architect Richard Andron.

In its place, Andron designed a modern two-story duplex, with a unit on each floor.

Wide angle view of the main-floor unit.

Both units have two bedrooms plus an office, two full bathrooms plus a powder room and the open-concept living areas and big kitchens with center islands that today’s buyers covet. Both kitchens boast quartz countertops, Wolf appliances and built-in wine coolers.

And unlike most condos, with windows typically along one wall, both units have big windows on all four. “There’s a lot of natural light,” said Andron.

He and his business partner, Nick T. Boosalis, a real estate broker, envisioned the condos as a response to the city’s 2040 plan, which calls for greater housing density.

“It needs to be done in a sensitive way that’s respectful of the existing neighborhood. That’s what we tried to do,” said Boosalis.

The home’s roofline has a similar scale and pitch to others in the neighborhood, said Andron, as well as some traditional components that help it blend in with its older neighbors. From the street, “It reads like a single-family home. It’s a concept to fit into existing single-family-home neighborhoods as seamlessly as possible.”

The two condo units are the same size, 2,400 square feet, and the same price, $1.168 million. They have a similar look and layout, but with a few differences.

The upper unit has more ceiling vaults and some skylights, as well as a separate informal breakfast area.

The lower unit has an extra-large island for informal dining. And both have private outdoor spaces — a patio for the lower unit and a deck for the upper.

Walkability is a major selling point. The condos are a block away from the heart of 50th and France with its

Top: The living room in the main-floor unit. Bottom, left: The bedroom in the owners’ suite. Bottom, right: The main bathroom in the second-floor unit also has a soaking tub.

popular restaurants, specialty shops and a grocery store, as well as a bank and post office.

“It’s kind of a mixture of a single-family neighborhood and urban living — the best of both worlds,” said Andron. “You get the convenience of a condo and the atmosphere of a neighborhood.”

The target buyers are empty nesters who want to keep the advantages of a house without having to maintain one, said Boosalis. A management company will handle lawn care, snow removal and other maintenance; association fees are $748 per month.

There’s a private elevator that opens directly into the foyer of each residence, plus a two-car heated tuck-under garage and heated driveway.

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CURRENT LISTINGS 3374 Glen Oaks Avenue, White Bear Lake, MN 55110 A one-story masterpiece with a LEAP award winning rear prairie & pond views. Enjoy the open floor plan and updates throughout.

The gourmet kitchen features granite tops, center island, stainless appliances, custom fixtures and stone-faced accents. The main floor features 3 bedrooms, hardwood floors, walkout to deck and private rear views. Enjoy the lower level brick-surround fireplace and walkout to your private patio. New roof, soffits, facia, electric, central vac, appliances, deck, paint and more - See Supplements for full list of updates. The list is endless.

$397,000 3440 Golfview Drive #307, Eagan, MN 55123 Wonderfully updated and private rear views - this condo is perfect!

Enjoy the vaulted ceilings, stainless appliances and well-appointed amenities. This unit is in very good condition with new paint, heated underground parking, elevators, additional storage unit, heated pool and more. This condo shines and won’t disappoint.

Conveniently located near shops, restaurants, parks and rec and priced to sell

$159,900 9330 234th Lane NE, Stacy, MN 55079 Welcome Home! This one-story home sits on 3 acres of private views and features an open floor plan & details throughout. Enjoy the large mudroom entry from the garage with ample storage.

The gourmet kitchen includes stainless appliances, calico birch cabinets, peninsula for informal dining and more. The main floor master suite features trayed ceilings, his & her’s walk-in closets and renovated tile surround shower. General home highlights include vaulted/knock-down ceilings, hardwood floors, lower level with heated floors and rear walkout. For the garage lover – over-sized 3 car, heated, floor drains and private lower level entry. Exterior features include a storage shed, generous landscaping & large rear patio with private views. This home is very well maintained with details throughout.

$439,000 Joe Holmes joeholmes@kw.com www.holmesgroupmn.com Office: 651.379.1581 | Cell: 651.491.2151

Bob Adamson btadamsonwbl@aol.com www.holmesgroupmn.com Cell: 651.387.6262

7581 Hilo Lane N, Forest Lake, MN 55025 Fantastic home one block from Forest Lake. With tons of updates & amenities, this home will impress. Enjoy the open layout and remodeled gourmet kitchen featuring heated floors, new stainless appliances, granite tops, custom lighting & fixtures and refinished cabinets. Main floor highlights include new 4 season porch w/ gas fireplace, hardwood floors, walk outs to patio & deck, formal & informal dining and more. Large items done with new siding & roof in ’15, newer windows & new driveway. Extra touches with a heated garage, wireless thermostat, hot tub, storage shed & planter boxes. This home is the one - don’t miss it!!

$349,000 2827 Spy Glass Drive, Chaska, MN 55318 With panoramic views of the 15th hole at Chaska Town Course – this townhome will impress! Enjoy the updates & amenities inside and out with an open floor plan, gourmet kitchen & so much to appreciate. The main floor entries are inviting & cascade to an open floor plan with 9’ ceilings & vaulted golf course views. The gourmet kitchen features granite tops, pantry, breakfast bar, new stainless appliances, drop-in sink, undermount lighting & custom cabinets.

Additional main floor highlights include sun room, deck, gas fireplace with tile surround & mantle, mud room from the garage entry and more. The upper level features an open loft, laundry with tons of storage and an over-sized owner’s suite with walk-in closet & nicely detailed master bath. This home has been wired for sound, features a security system, new water softener with transferable warranty & unfinished basement for more square footage!

$309,000 11433 Kingsborough Trail, Cottage Grove, MN 55016 Endless amenities and detail with soaring views of the Mississippi River and Golf Course. Over 5,000 sq ft with 6 car upper and lower garage on1.5 acres – new construction doesn’t compare. Barrelvaulted entry leads to exquisite main floor with all living facilities.

Enjoy endless details inside and out with open living spaces, 13’ tray ceilings, highest quality finishes, fun spaces for entertaining and more. Private rear golf course views, extensive patios and landscaping, deck with pergola, heated garages – the details are endless.

$849,000 Heather Pederson hlpederson@kw.com www.heatherpederson.com Office: 651.379.6315 | Cell: 612.964.2524

Jay Mangine jaymangine@kw.com http://jaymangine.kw.com Office: 651.379.6362 | Cell: 612.865.0400

Q A

How has COVID-19 impacted our market?

&

Joe answers questions he received from clients. Feel free to submit your own question.

Tweet us: @HolmesGroupMN Email us: joeholmes@kw.com

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Well.. getting right down to it on this question.

It’s impacted in several ways and probably more than anybody has realized as it tweaks all different kinds of concepts. As we mentioned in Holmes on Homes, it’s created less inventory. It’s not as if selling your home during a global pandemic is going to increase our inventory, so naturally the listing inventory is a bit lower. Other factors to consider – Covid has created a massive increase in home projects & remodeling with all this attention to staying home.

Add that into a shortage in lumber and an already hot new construction market and you get lumber prices that are out of control. Lumber has increased 30-40% in pricing in the last 6 months alone! Covid’s fingerprints are on a lot of concepts that have impacted our market.

How’s the market – seriously can you still sell a home overnight?

Ok Ok.. homes can sell quickly but it doesn’t mean that they do and it doesn’t mean you should lose your marbles if your home hasn’t sold in a week, month or even a year. Yeah.. even a year! First of all .. there are literally 100’s of markets within the Twin Cities market. So not all things are created equal. Condos in St. Paul.. Single Family homes in Plymouth… Townhome in Woodbury… and to blow the consistency right out the water, price ranges very greatly too. You have to look into the supply/demand ratios of YOUR market – geography, style, price. From there you can determine how to price. If you price high or low within that platform, you can then gauge an expected “time on market” to find a buyer.

Are those cash buyers or iBuyers back in business?

What are you going to be for Halloween?

Oh yeah.. those guys! Open Door, Zillow and a few others have resumed business now that their “pause due to covid” has been worked out. I don’t see as much advertising from them yet but it’s coming. The local companies are still my go-to and favorites to work with. Their offers are better, for more money and have less hassle. They have less advertising dollars & overhead so naturally can offer you more. Market Pass (through our office) is now finally available and able to make cash offers on pretty much any home – price point specific. We’ll see where they’re at on max purchase price and assume that test is coming for them shortly.

HA! Good question and I have no clue. I usually don’t dress up and not sure what we’re going to do this year. We have a Costco-sized bag of candy for trick-or-treaters. Admittedly, I have no idea how much of that will be left by the time Halloween comes around. I see a 2nd bag being purchased in our future. I’m not sure what to expect this year. We’re planning on taking the kids through the neighborhood with our neighborhood friends and assume things will be “normal” whatever that means these days.

What’s new at the Holmes Group?

CALL US TODAY! 651-379-1581

Lots of new things actually.. We’re working on a new look across the board with the magazine, website, logos, professional photos and more?

Time for some changes! We’re also working on new systems internally that help us function a bit more efficiently. Although that’s stuff you can’t see.. hopefully you’ll see the difference in a more mainstreamed approach on our customer service & detail through the sales process. For those of you not in that sales process – you should notice a better approach to our outreach. We’re focusing our attention to relationships rather than a larger marketing platform.

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OnlineCrosswords.net This is the Daily Crossword Puzzle #3 for Oct 3, 2020

Find the solution at https://onlinecrosswords.net/6318

CROSSWORD SUDOKU Puzzle A

Puzzle B

Across 1. Con game 5. Monastery leader 10. Study in a hurry 14. Sharpen 15. Low poker card 16. Judge's garment 17. Opera highlight 18. Sheik's bevy 19. Creative thought 20. Junky car 22. Church-tower item 23. Team member 24. Lunch time, for many 26. Beloved 29. Coffeehouse selection 33. Saudi citizen 37. Make a trade 39. Book of maps 40. Employee reward 42. Commotion 43. Fishing devices 44. Cuban dance 45. Harvard rival 47. Chimney residue 48. Men-only parties 49. Tenant's payment 51. January to December 54. Doctrines 59. Playwright George Bernard 62. Traffic-jam cause 65. "That hurts!"

66. Like a lot 67. Succulent houseplant 68. One who's against 69. Highway haulers 70. "What __ you thinking?"

71. Invitation initials 72. Rail riders 73. Mailed out

Look for these Sudoku Puzzle solutions in the next issue!

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Across Down Down 1.

Con game Like a tack 1. Like a tack 46. Eternal 21. Was1. ahead 5. Monastery leader 2. Reef material 2. Reef material 50. "Little piggie" 25. Sharif of film 10. Study in a hurry 3. Singer Baker 3.

Singer Baker 52.

Put to shame 27.

On vacation 14. Sharpen 4. Like a filet mignon 4. Like a filetcard mignon 53. Wild West show 28. Traffic 15.

Low poker 5. controller's Sticks (to) device 6. Outscore 5. Sticks 55. Chews like a beaver 16.

Judge’s (to) garment 17.

Opera highlight Perryfor Mason portrayer Raymond 30. Nile 7. queen, short 6. Outscore 56. Free-for-all 18.

Sheik’s bevy 8.

Pacific, for one 31.

Angelic symbol 7. Perry Mason 57. Oak seed 19.

CreativeRaymond thought 9. Rhythm portrayer 32. Office aide: Abbr.

58. Clay-pigeon sport 20. Junky car 10. Cheat sheets 8. Pacific, for one 33. Kindergarten basics 59. Fly like an eagle 22. Church-tower item 11. Took a bus plant 9.

Rhythm 34.

Underground 60.

Attila's followers 23. Team member 12. Brother of Cain part 10.Lunch Cheat sheets 61. End of many 24. time, for many 13. Breakfast or brunch 35. Fictional Karenina 11. Took a bus Shakespearean plays 26. Beloved 21. Was ahead 29.

25. Sharif of film 36. Old carriage driver's 12.Coffeehouse Brother of selection Cain 63. __ of the Unknown 33. citizen or brunch 27. On vacation implement Soldier 13.Saudi Breakfast 37. Make a trade 28. Traffic 38. Vaulter's toolcontroller’s device 64. Threesome 39. Book of maps 41. Encl.30. Nile with aqueen, for short 40. Employee reward 31. Angelic symbol manuscript 42. Commotion 32. Office aide: Abbr.

43. Fishing devices 33. Kindergarten basics 44. Cuban dance 34. Underground plant part 45. Harvard rival 35. Fictional Karenina 47. Chimney residue 36. Old carriage driver’s implement 48. Men-only parties 38. Vaulter’s tool 49. Tenant’s payment 41. Encl. with a manuscript 51. January to December 46. Eternal 54. Doctrines 50. “Little piggie” 59. Playwright George Bernard 52. Put to shame 62. Traffic-jam cause 53. Wild West show 65. “That hurts!”

55. Chews like a beaver 66. Like a lot 56. Free-for-all 67. Succulent houseplant 57. Oak seed 68. One who’s against 58. Clay-pigeon sport 69. Highway haulers 59. Fly like an eagle 70. “What __ you thinking?”

60. Attila’s followers 71. Invitation initials 61. End of many Shakespearean plays 72. Rail riders 63. __ of the Unknown Soldier 73. Mailed out 64. Threesome

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Great Pumpkin Patch.

Great Realtor.

Easy. Simple Real Estate.