Melanie!! It indeed looks like that Downy has excavated a nest cavity or has enlarged an unused one. Keep your eyes out in the coming weeks and months for the adults going in and out and eventually babies peeking out and waiting to be fed! We had a pair of Downy WP's excavate a hole in a Camphor tree once, where they raised their young. It really surprised me because it wasn't real high in the tree either, maybe about 10 feet up. I think it was in 2010
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