June 2023

Emotional resonance is all but mandatory in today’s marketing landscape. You can’t just make a stellar product and count on buyers to come to you—you have to lure them in. And with inflation prompting customers to prioritize savings, you can’t count on brand loyalty to keep them coming back.

To gain and retain a customer’s attention in an increasingly competitive and unpredictable marketplace, you need to build deep and lasting connections. Then, like a good romantic partner, you must make them feel truly seen and understood. Here are some ways to get started.

1. Study Your Customer’s Feelings

Research shows that people’s decisions are driven more by emotion than by logic. If you can figure out what’s in your customers’ hearts, you can calibrate your strategy to tug on the right strings.

You can use traditional market research tools like customer analytics, surveys and CRM data to do this. But these might not give you the level of depth you’ll require to really identify with your customer. You don’t just need to anticipate your customers’ behavior and decisions. You really want to understand why they make the choices they do and how they feel about their decisions.

Focus groups and other qualitative research tools give you more insight, but they demand a lot more time and money. Instead, you can partner with companies that are innovating the science of collecting emotional data, developing more advanced methodologies for understanding customers’ reasoning. Through advanced analysis, they can quickly determine what motivates customers and figure out how to persuade them to act.

2. Rewrite Your Story

Once you understand what’s meaningful to your customers, you can start to realign your messaging with their—sometimes surprising—feelings. If you sell hybrid cars, you may discover your audience cares more about feeding their families than saving the planet. If your current brand story is about environmental benefits, you could start proselytizing about the long-term savings of going hybrid instead.

Or you can go in a different direction with emotions, one that has little to do with the story of your brand. You can simply use your customers’ motivating emotions to gain visibility, as in the case of “sadvertising.” The messaging doesn’t even need to relate to the product if you convince customers your brand shares their values.

Do you remember the do-gooding protagonist of the Thai life insurance commercial that went viral a few years ago? The spot played into consumers’ sense of empathy and desire for connection, without really saying anything about the product. Such ads work because they make customers feel something, and that makes them remember you.

3. Segment and Curate

Besides tweaking your overall brand story, you need to curate emotion-based content for different types of customers and interactions. To do this, segment your marketing based on the motivating emotions of different customers. Maybe you have one demographic that’s moved by fears about toxic chemicals in their food. Another is driven by extreme jealousy of their fitter, slimmer friends. Those two groups should get very different ads for your vegan meat substitute.

When developing your marketing strategy, you can also think about how you want customers to act in response. You can curate your content around different business goals, like establishing more online presence or earning customer loyalty.

Research shows that anger and awe tend to go viral the fastest. If you want to reach more people quickly with a new product, target your ads around those emotions. If your goal is to build brand loyalty, on the other hand, research shows your marketing should evoke fear.

4. Use Testimonials and Word of Mouth

One of the best ways to connect with customers is by making them feel closer to the product. Social media marketing, testimonials and other word-of-mouth strategies can be some of the best emotional marketing tools. In fact, 81% of customers said social media posts from influencers or personal connections made them consider buying something.

Hiring trusted influencers to promote your product to their social media followers is one way to do it. Another is creating viral content that people will share voluntarily on their social media. A link from a friend makes a customer feel much closer and more connected to a product.

Getting more customers to review your offering can also go a long way toward fostering that sense of connection. Research shows people trust online product reviews almost as much as personal recommendations and more than they trust brands.

5. Give the Right Cues

There are other, more subtle ways digital marketers can play into customers’ emotions. Certain colors and word choices, for instance, evoke particular emotional responses in customers.

Blue can signify trust and dependability, increasing customer confidence in hospitals or health insurance companies, for example. Green signifies nature and is great for selling environmentally friendly products and fresh food. Red can evoke urgency or make a customer feel hungry, so it’s a good choice for clearance sales or fast food.

If all else fails, you can go the old school route of making customers insecure about their looks. But in this day and age, inclusivity and positive marketing will get you a lot more bang for your buck.

Know Thyself

The core of an emotionally resonant marketing strategy is, first and foremost, knowing and catering to your customer. Before making big changes, audit your current marketing strategies to see what’s already resonating. Get as clear as you can on what your brand has to offer and expand on what’s working.

Bear in mind that you can always tailor, segment and recraft your emotional marketing—to a point. But be wary of ever straying too far from your brand’s core message and values. The most important core emotion you need from your customers is trust. To earn it, you need to keep your story straight.

Dave:
Hey, everyone, it’s Dave. Welcome to On the Market, and I’m going to completely lose my credibility here and just tell you all that we have one of our best shows ever. I know I just keep saying this, but we have had so many good guests and so many good episodes recently that I genuinely think this is true today. I am here by myself, as you can probably tell, but I am having a great conversation with Mark Fleming, who is the chief economist for First American. If you’ve never heard of First American, he explains it a little bit, but it’s one of the major title companies in the country.
Mark, who is a professional economist, and his team have built some incredible models that help us understand what is going on with home sales volume in a way I’ve honestly never heard before. People, I think headlines when you read the newspaper, listen to the media, always concentrate on home prices. That’s like the sexy thing to talk about. But the more you learn about the housing market, I think the more you see that one of the, if not the more important measure of the housing market health is actually the number of home sales that are going on. Because this doesn’t just affect investors, it affects real estate agents, loan officers, property managers, title companies.
The whole industry is really dependent on how many times a year homes are changing hands. Mark has built a really fascinating model to predict how many homes should be changing hands based on things like demographics, household formation, inventory, affordability. It’s really fascinating. I really had a great time having this conversation with Mark, and he tells it in such an engaging and easy to understand way. I think you guys are going to absolutely love this episode. If you do like this episode as much as I think you’re going to and as much as I did, please make sure to leave us review on either Apple or Spotify.
It takes just a couple of seconds and it means a whole lot to us. We are going to take a really quick break, and then we’re going to bring on Mark Fleming from First American. Mark Fleming, welcome to On the Market. Thanks for being here.

Mark:
My pleasure. Thank you for having me.

Dave:
Mark, can you just tell us a little bit about your involvement in the real estate world?

Mark:
Sure. I’m Mark Fleming. I’m the chief economist at First American. That’s the easy part. My involvement in the real estate world is… Well, first of all, I’ve been studying it as a real estate economist for my professional career a little over 20 years now. At the moment, in the capacity of chief economist of First American, my job is essentially to monitor the markets and understand what’s going on to help our business make the right decisions, as well as obviously provide lots of content to everybody who wants to listen to our podcast or read our blog posts and disseminate what we think might be of value to people who make decisions in this world.

Dave:
Wow, that’s great. You said for your business. I know First American is a giant title company, right?

Mark:
Yes. The thing that nobody knows or understands until they actually get involved in it. How many cocktail parties do people go to outside the real estate industry? Like title what? Title insurance, insurance that you own your property or insurance that the lender has first lien position rights on the loan that they give to you, critical in the closing of a transaction in most cases, whether it’s with a mortgage lender or a purchase.

Dave:
All right, great. What are some of the things that you’re following most closely in the unique housing market we’re in today?

Mark:
Yeah, very unique. I was talking to a colleague last week and they said, it must be really interesting right now with everything that’s going on. I thought, actually studying the market as an economist, the more bad things or odd things are happening, the more interesting my job gets, right?

Dave:
Oh, totally. Yeah, yeah.

Mark:
It’s not fun when it’s just growing 3% a year, right?

Dave:
I wouldn’t be on this podcast now, would I, if there was going to be nothing to talk about. We just went through a pandemic. I don’t think many real estate economists ever get that opportunity. It’s been a fascinating ride. Honestly, we look back historically at the real estate market. When was the last time it was normal?

Mark:
Yeah, that’s a great point. I don’t know. The ’90s?

Dave:
Yeah, exactly.

Mark:
We think somewhere in probably the late ’90s was about the last time it looked normal. We had a housing bubble in the first decade, the latter part of the first decade of the 2000s, and a very long and steady recovery for the last decade, a pandemic in 2020, cutting rates and inflation now. Yet all of these things are exciting. And because so much of what’s gone on in the last decade in particular has influenced interest rates in general and thereby mortgage and commercial real estate rates by association, we’ve ridden a low rate environment for the last 10 to 12 years. What’s most interesting now is that’s changing.

Dave:
Well, I want to ask you, you brought up something I’ve been wondering about. Are we just in a new normal? Like you said, it’s not normal, but do you think… If you look at the data back to I think like World War II is probably what I can think of in my mind, the housing market was much less volatile than it has been in the last 20 years. You just cited some reasons. Do you have any reason to believe that we are ever going to get back to that less volatile, stable linear growth, or do you think now the way the Fed policy is and things are working that the market is going to be a little bit more unpredictable?

Mark:
Obviously I think the volatility in the market is in large part driven by volatility of interest rates. You’re right, the latter half of the 20th century, most of it was more stable rates, although there are many that suggest that there’s an 18.6 year real estate cycle. Very specific there. Those 0.6 years are important.

Dave:
Okay, I haven’t heard that.

Mark:
That cycle has actually held in some way, shape, or form. Most of our data starts to come to bear in the late ’70s and early ’80s, so I like to start the time series charts in 1981 or 1980 when Paul Volcker was trying to ring inflation out of the economy. Sound familiar? And at that point drove, get this, the 10-year Treasury yield up beyond 10%. 10%.

Dave:
That’s wild.

Mark:
The 30-year fixed rate mortgage peaking in 1981 at 18.1%. Now, what happened? There was an affordability crunch. People lost a bunch of house buying power and the number of sales cut in almost half in the early ’80s because of that attempt by the Fed, successfully, to ultimately ring inflation out of the economy. Since then, I think your point is definitely valid. Once we got through that phase and interest rates basically started from 1981 up until just last year, a long run downward trend. At any point in time in all odds would be you buy your home. Two, three years later, you refinance it.
Why? Because rates are lower. Two, three years after that, you sell. Why? Because rates are lower. We’ve had that very, very long 40 year run essentially of declining rates, most recently hallmarked by a 10-year period over the last 10 years of rates at rock bottom rates. Mortgage is at four and three. I thought I’d never ever see it, but below 3% 30-year fixed rate mortgages last year and the year before.

Dave:
We’ve had some guests on this show who have suggested that given monetary policy, it’s really been swinging back and forth. It used to be, I guess, little less interventionist in the past and now it’s a little bit more maybe leading to continued volatility in interest rates. I know no one knows for sure, but I’m just curious if you have any thoughts on that.

Mark:
The economist in me wants to say, well, first of all, you have to understand that there’s monetary policy and there’s fiscal policy, and both need to be done potentially in concert with each other. I don’t know if that necessarily happens that well, but in lieu of fiscal policy, monetary policy has been used as the tool to try and do more. Of course, it really only operates through the financial markets. That’s how monetary policy works. When you try and do a lot with monetary policy, it doesn’t necessarily work as efficiently as fiscal policy does ultimately if you’re loosening policy economic stimulation.
But what it does do is it changes the behavior around the value of assets. That could be stock market assets, that could be bonds, that could be real estate. To your earlier point about volatility, I think the monetary policy has input volatility particular into our asset class of real estate in the last couple of decades for sure.

Dave:
And just to be clear, and Mark, you’re much smarter than I am, so correct me if I’m wrong here, but just to make sure everyone understands, monetary policy is basically what the Fed does. They control interest rates in a way, and they now do things like quantitative easing or tightening to control monetary supply. This impacts everything from inflation and obviously their goals are dual in controlling inflation and trying to maximize employment. Fiscal policy is basically the power of the purse, like what Congress does, basically how much is spent and on what.
As Mark was saying, both of them have huge impacts on the economy, but I think we’ve seen or at least felt the impact of monetary policy a bit more recently. But obviously fiscal policy, like the stimulus packages, for example during COVID, obviously also have big impacts on the economy.

Mark:
You did an excellent job in describing the two. Honorary degree in economics granted.

Dave:
Oh, thank you.

Mark:
I didn’t know you have that power, but that’s great. You’re absolutely right. The last couple of years have been fascinating because the pandemic was this unique circumstance where we loosened monetary policy, increased the money supply, encouraged consumption with less expensive money, lowering the interest rates, and at the same time, obviously very, very large fiscal policy packet. It was the double whammy to overcome the influences of COVID. The truth is now obviously we are suffering the consequences of all of that stimulus being put into the economy by both methods in the form of higher inflation.

Dave:
Yeah, absolutely. It was perfect storm of stimulus all at once. Great. Well, I diverge, but I enjoyed that. Thank you. But you were talking a little bit about just what you’re seeing in the housing market right now. We talk about a lot on the show, I feel like, the word of the year for the housing market is just inventory right now. We’re always just talking about inventory. But I’m curious what you make of the situation with inventory, given what we’ve already talked about. Is this do you think a trend that’s going to continue or we’re going to have a lot less on the market?
Because when I hear you saying, yeah, for basically 40 years, interest rates were going down and people had an incentive to move and to refinance, no one knows exactly what will happen, but it seems like we’re heading in the other direction. Do you think this could be a structural shift in the supply and demand dynamics in the housing market?

Mark:
Absolutely. I don’t call it inventory, I call it noventory, because that’s fundamentally the problem. You’re absolutely right. The last 40 years of that downward trending long run interest rate stimulated not only refinancing behavior, but most importantly for the housing market, purchase behavior, selling and moving, turnover in real estate parlance. Prior to the early 2000s, typical amount of time spent living in a home between two purchases was anywhere from five to seven years. That’s now almost 11 years.

Dave:
Wow!

Mark:
Yeah, so double, right? If you take a stock of 100 million, make the math easy, so there’s a little bit more of that, but 100 million residential housing units in the United States, if everyone’s turning over once every five years, you get a certain amount of volume of inventory. If they’re only turning over once every 10 years, it’s half as much. You have to go back and look, well, why were people selling so frequently on a five year cycle? That was because of declining interest rates. There was a built built-in incentive to move and buy the next house up and the next house up, and ultimately that new home for your family.
That move up buyer concept worked financially because rates were in the long run coming down. And now that has changed. Something like 80% plus of all mortgaged homes today have a mortgage of under 5%. That means most of those homeowners, if they were to make the move decision, there’s a financial penalty to be paid in. Even if they were to buy the same home back from themselves proverbially, it would cost them more per month because they’d lose that low rate, let alone the people at three and less than 3% mortgage rates. That turn to an upward rise in rates has created what we refer to as the rate locking effect.
We believe that is one of the fundamental reasons why we see a lack of inventory, and in particular, a lack of new homes being listed, because the vast majority of homes brought to market for sale are brought to market by an existing homeowner. That existing homeowner is very likely to have one of those mortgages, and it doesn’t make financial sense for them to move. There’s one other aspect to this, which gets a little trickier. You could call it the chicken and the egg problem. The economist game theory concept is the prisoner’s dilemma. I’m a prisoner. I have a dilemma, which is homes are unique.
I might not feel too strongly about the rate lock in effect. You know what? I’ll pay the penalty. I’ll want to move. The problem is, it’s not like I can just buy any home. Homes are what we refer to as heterogeneous goods. I need to try and find a home to buy that is better than the one that I live in today. Otherwise, why pay the penalty of the rate lock in effect? I’m trying to find something better to move into. Well, because you can’t just buy any home. The fewer homes there are to choose from, the riskier it is to make the sale decision, because the buy decision is being made at the same time, the seller and the buyer is often the same person.
You’re saying, I don’t know that I want to move or participate in the market because I’m worried about being able to find something that I like to buy. Another analogy that might resonate, it’s Match.com for homes. The more people there are on the Match.com site, the more likely it is I’ll be able to find just the right person to match my preferences. Housing is a matching problem as well. I have to find the home that I want to date the most and maybe marry in this analogy.

Dave:
That makes so much sense too though. With matching romantically, it’s not like there’s this time pressure where you have to make the decision to go look for a potential partner, and then you have a limited window to find that partner. But in the housing market, you often make the decision to sell your house before you’ve necessarily bought a new one because you need the money, the down payment for them, your sale to close before you purchase your next one. Is that the chicken and the egg thing? Because people, they have fear that it’s not worth taking that risk of putting their home on the market because there’s just nothing to buy.

Mark:
There’s nothing to buy. You fear not being able to find the home to buy once you make that decision. The prisoner’s dilemma issue here is that everybody’s sitting back and saying, “I’m not going to participate because I’m worried about being able to find somebody to buy because there’s not enough homes to date on the market.” But if everybody made the same decision to enter the market, there would be plenty of supply. The prisoner’s dilemma is it’s risky to be the first one.
Because if I make the decision and everyone else doesn’t, that’s bad. But if I make the decision and everybody else does too, then we’re all okay. The game theory that goes through this basically says everybody sits back and no one takes the chance. You get this housing liquidity problem, like the market seizes up for fear of being the first one and getting burned.

Dave:
We just need to coordinate somehow all these people who are thinking about selling and just get them all to list it on the same day.

Mark:
Exactly.

Dave:
Just have a Black Friday of housing inventory and kickstart the market again.

Mark:
It really is like a kickstart, how do you get the flow going and get people comfortable with the idea. I know if I sell, there’ll be plenty of options for something to buy.

Dave:
It’s so interesting just how much of economics, you obviously know this, but is just psychology and people’s fear. It’s a less than perfect science.

Mark:
Exactly.

Dave:
And at this point also the dismal science, unfortunately.

Mark:
Yes. As they say, the dismal science. Yes.

Dave:
I understand that you and your colleagues at First American, in order to understand this problem have developed a model to predict home sales and what they should be. Can you tell us a little bit more about that?

Mark:
That’s right. I mean, we always have to ask ourselves the question, since there’s been so much volatility in the number of home sales, we start to ask, well, what should it be? And then what should it be usually has us asking, well, what are the fundamental drivers of people wanting to sell homes or the amount of home sales that exist? Obviously a couple things come to mind. One is demographics. The faster the population is growing, the more households are being formed, the more demand there is for housing. The economic situation. People tend not to buy big, expensive purchases like a home if there’s a recession or they fear losing their job in the next 12 months.
The unemployment rate and the health of the economy is very important. And then affordability. Affordability gets a little trickier because affordability is a function of the interest rate, obviously, or the mortgage rate, but it’s also a function of what’s available to be purchased. For example, Jeff Bezos can buy any home. Affordability is high for him. At the other end of the income spectrum, the pickings get much smaller. The question is, how much of what’s available for sale is actually affordable to that potential first time home buyer who we classify as a renter? I don’t worry about demand and affordability for the existing homeowner.
They’ve solved the problem. They’re an existing homeowner. It’s that renter. We put all the information in about what are renter incomes, what are the mortgage rates, what is the trend in household formation, these fundamental drivers to estimate what we expect the underlying support is for the number of home sales. Right now it’s close to five.

Dave:
Close to 5 million annualized. Existing home sales, seasonally adjusted annualized rate, SAAR, million a year. What are we at? We’re at like 4.8 now.

Mark:
4.5 or 4.6. Yes, it’s not that far.

Dave:
4.6. 4.6. Okay.

Mark:
It’s a little under, but it’s not woefully under the expectation given the situation. Well, could it be higher? Yeah, it could be as high as six if we had lower mortgage rates and higher affordability, if we had more household formation. One thing that’s happened in the past 18 months is household formation has slowed down dramatically. That’s because in part, people coming out of college right now are like, wait a second, with all this uncertainty, I might just stay home. And also because we’ve just had a really big boom in household formation, demographically driven by millennials, that’s now fading.
All of these things are contributing to what the right amount is. We right now are attributing the difference between what we expected to be closer to five and where we are at 4.5, 4.6 to that rate lock-in inability to find something to buy problem because that’s really hard for us to model, if you will. We don’t have any data to know otherwise in the last four years.

Dave:
Wow! Super interesting. Okay, great. This is really helpful. It sounds like a really fun project from an economics and analytical standpoint. I respect that. I’d love to just break down some of those variables a little bit if you’re okay with that.

Mark:
Sure.

Dave:
First and foremost, you said household formation, and I just want to clarify with everyone what that is. We’ve talked about it a little bit on this show in the past, but basically a household is a group of people living together. It doesn’t necessarily have to be a group. Actually it could be an individual too, or it could be a family, roommates, that sort of thing. Basically how many independent people are living in unique houses.
That’s a great measurement for the housing market because it measures total demand both for rentals and owner occupied properties. I think you said something, Mark, that is really important that a lot of times I hear people conflate household formation and demographics. Demographics in my mind play a big part in household formation, but it’s also an economic decision, right?

Mark:
Exactly.

Dave:
There’s also this other part to it that is more proactive and conditional upon what’s going on in these people’s lives, right?

Mark:
You’re absolutely right. There is obviously the underpinnings. I mean, we’re in the business of shelter, right? Real estate, whether it’s multifamily or single family owned homes, essentially it’s the service of shelter to households. The more people there are demographics, the more demand there is. But within the longer run, very slow moving trend, which by the way, I love forecasting demographics because I’m pretty sure, Dave, I can forecast you’ll be a year older a year from now, that is about as good as I can get as an economist. Everything else gets worse from there. Within that long run decision, there are all kinds of timing decisions.
Perfect example, we saw a big surge in household formation at the beginning of the pandemic because people who were roommates, 20 something year old millennials living in a two bedroom apartment, I live in Washington, DC, so in Arlington, that’s a fun place to live If you’re in your 20s, was great until you both had to start working from home out of your bedrooms. You got tired of that living situation. And because things were good, you split up and one stays in the apartment and the other one moves out. Well, essentially what does that do? It forms a new household and that new household needs to seek shelter.
We saw a big spike in household formation largely just because basically existing households were breaking up with each other. That has now turned because of this increased uncertainty and weakness in the job market. For example, a young person finishing college with a computer science degree, this may right now as we speak, who had hoped to work at one of the big tech firms, all of a sudden a lot more difficult to get a job. Where do they go? Home. No new household formed. No more maybe getting together with another computer science buddy to form a household. Household formation has now actually come down.
That is one of the prime reasons why we see vacancy rates in multifamily beginning to spike up, rents soften, and multifamily prices come down because basically that fodder, those new households almost always start as renters, has dwindled dramatically in the last year.

Dave:
That makes a lot of sense why that would be a variable in how much sales volume we should expect. And just remember, the reason I’m curious about this, and I’m sure the reason why Mark and his team have spent so much time on this, is home sales volume, I know it’s not as trendy as like home prices whether it’s going up or down, but has huge impacts on prices, but also on the industry in general. If you’re a real estate agent, you obviously know this. If you’re a loan officer, you obviously know that the volume of transaction is going up or down.
That’s why we’re digging into this is because the direction of home sales and where they should be or might be going is obviously going to have an impact on everyone who’s even tangentially related to the real estate industry. The other variable you said that goes into this model is affordability. I would love for you to just, can you tell us a little bit about how your measurement of housing affordability may differ from other ones, because it’s a little bit different than other measurements I’ve heard of?

Mark:
The classic affordability measure is the ratio of income to house price. Arguably say, well, if that ratio gets out of whack, those house prices are growing faster than incomes are, then you’re losing affordability. And that’s only partly true. The other fallacy, if you will, that’s often used is this idea of real prices. You mentioned prices. Often in economics, inflation adjust the price of something. That is a function of the inflation rate. People will say, “Well, house prices have gone up by 10%, but the inflation rate is 2%. In real terms, house prices have only gone up by 8%.” The problem with that analysis is you don’t take into account buying power.
The best way I like to explain it is if you think about real prices with a gallon of milk. If a gallon of milk has gone up by 2% and your income has gone up by 2%, is your purchasing power any worse or better off? Trick question, it’s the same. It’s the same, right? But when it comes to houses, it’s not just your income going up. Turn the gallon of milk into a house. If a house has gone up by 10% and your income’s only gone up by 2%, then you might say, oh, it’s less affordable, because you haven’t been able to keep pace. But what if interest rates have gone down? You buy a home with a mortgage. It’s not just your income, it’s your income and the mortgage yielding how much you can borrow.
Of course, what happened in the last decade was as interest rates came down very dramatically even though incomes were not rising very dramatically, purchasing power grew very dramatically. It almost doubled in the last decade. That meant that people with the same or only modestly higher income could afford to buy much more home. I’m pretty sure we don’t need to explain to your audience what happens when people can afford to buy more and they run into a market lacking supply. Prices get bid up.

Dave:
Bidding wars. Yeah, yeah, exactly.

Mark:
Bidding wars. Prices to me are the result of the supply and demand dynamic. When prices are moving dramatically in one way or the other, that’s a sign of an imbalance between the supply and demand dynamic. What we had over the last few years was a very out of whack market in that demand was being so driven by all this buying power because mortgage rates just kept getting cheaper and cheaper and cheaper, affordability kept going up and up and up, and prices were trying to correct that affordability imbalance. Housing was too affordable if we were to say that, right?

Dave:
Well, it is. I mean, yeah, it’s true. It’s not the dollar price, the how much per month does it cost me to be able to live here. And now we’ve turned it around the other way as very quick change and drop in affordability because of the large spike in interest rates. And now prices saying, well, wait a second. Even with the lack of inventory, we might be out of whack. Prices are, again, beginning to adjust on the downside to that. But to us, affordability is this concept of purchasing power relative to price changes.
For most of the last 10 years, purchasing power has been going up faster than house prices have, meaning it’s becoming more and more affordable. You hear some more simplistic views of affordability. I think by most measures it’s down, but this seems like a much more accurate way to measure just how much it’s been impacted.

Mark:
Have you ever met the median incomed purchaser?

Dave:
No. I have no idea who that is.

Mark:
You get my point, right? The median income, well, that’s like none of us. There’s only one person who meets that bill, technically speaking. Everyone else is not that person.

Dave:
Right, yeah. It’s like this person’s like, I am the median income, and therefore I will buy the median priced home in America. I will get the exact average interest rate that’s available. It doesn’t really exist. I really like that much more nuanced approach to measuring this. You said your model is saying that about five million is where we should be. Can you shed some light historically on home sales volume and where we are today and where your model suggests we should be and how that compares to historical averages?

Mark:
We mentioned at the beginning of the episode, when was the last time it was normal, and we looked back to the late 1990s for that. It turns out that in the late 1990s and early 2000s, the existing home sales were running at a rate of about four million a year, little over four, close to four. And then of course, we ran up to the peak of the housing boom, we hit seven million. We almost doubled the pace of sales. Now, as we all remember, that was sheer turnover. Turnover for the speculative aspect of turnover was a lot of that seven. And then a big correction down again, from which we’ve really made a very, very slow recovery back up to we were at six and a change in the early days of the pandemic.
Over the course of the last 20 years, we’ve basically been bounded somewhere between four and seven. I would argue that we all know that seven was unrealistic. That was a speculative bubble kind of scenario. Between four and six. The underlying demographics over the last 20 years of population growth and the long run push on household formation has pushed us from a should be around four in the early 2000s to should be around five now scenario, maybe a little bit more if you had a better affordability environment. But that gives us our bounding range of what seems normal is we’re not that far from it.
The problem is it’s been so volatile and we all anchor bias to the best year we’ve ever had year after year. I mean, remember 2019, the best year we’ve ever had. 2020, the best year we’ve ever had. At some point, you can’t have the best year you’ve ever had, right?

Dave:
Absolutely. And that turned out to be 2022 and likely 2023. I mean, in that context, five million home sales, and we are below that, just for the record, but your model doesn’t seem that bad. It’s actually almost surprisingly high to me.

Mark:
I mean, this is not an exact science. Let’s be clear about this. It does give us some insight more so into what would be the causes. Understanding the dynamics and the driving forces I think are more interesting than what the number actually is. We also have to remember, you made the point earlier, so much of the ecosystem of real estate is predicated on I call them widgets through the pipe. But it’s not just the purchase widgets, it’s not just the sales widgets, it’s also all the refinance widgets. The housing market was in the old days the… Oh, mortgage market, I should say, in the old days, the typical adage was 70% purchased, 30% refi.
Well, anybody who’s been in the mortgage space for the last few years knows that it was flipped. Not even 70/30 flipped. It was like 90/10 or 20/80. Even with six million home sales, there were so much refi widget business. And that part of the mortgage market has essentially evaporated. You go from not only are home sales down relative to a couple years ago, but the whole refinance side of the mortgage finance market is basically more than cut in half. That’s where I think we get the sense of, oof, this is hard. Well, if you’re in the mortgage world, it’s a lot harder than if you’re just in the purchase space of the housing market.

Dave:
Wow, that’s incredibly helpful to understand here.

Mark:
Dismal scientist here.

Dave:
Yeah, yeah, no, no, I totally understand. I mean, all that being said, I know it’s not exact. It is, I think, more important to understand the variables going into it, especially people who are trying to invest and need to craft a hypothesis about the market. Just having a number is not as useful in my opinion. I mean, it’s tempting to just look at a number and be like, oh, that’s what we should be like, but really understanding the variables that move the market are extremely important.

Mark:
Investing is forward-looking. It’s not what the number is today, it’s where you think that number will be in the future.

Dave:
Well, now you have to tell us where it’s going to be, Mark.

Mark:
Well, first of all, I’ll start with the real basics qualitatively. This is real estate. You can’t outsource it. I mean, I need it here. I don’t need it in China. I need it here, and everybody needs it. You start with these two fundamental, really good principles that don’t go away no matter what the economic cycle is.

Dave:
It’s pretty strong.

Mark:
There’s a good underpinning here. I’ve worked in this industry now for a long time, and I’ve really loved that aspect about it. There are not many goods that everybody literally needs every day. That said, then you have to ride the cycles. And to your point, we think sales are down significantly from where they were, but those were high points. Those were the abnormal years. This is much more looking like normal, and a lot of the evidence is seeming to suggest that we’re troughing in many places.
In other words, the corrections due to rates seem to have sorted a lot of things out. House prices are actually stabilizing. Existing home sales have also stabilized in that mid four range. Mortgage applications have stabilized. The Fed is probably done raising rates if maybe only a quarter point more. That’ll be an interesting thing to see in the next couple of weeks. We don’t like volatility, but a lot of the volatility seems to be passing, and maybe we are getting close to this is looking more like the new normal.
What is the new normal? Four and a half to five million home sales a year with a mortgage interest rate around six to 7%. House prices basically stabilizing, so affordability comes back slowly as people’s incomes grow. Wow, that actually seems like Back to the Future, not so long ago normal. Right?

Dave:
I guess that’s like the ’90s. That’s where interest rates were back then, six, seven, 8%, something like that. That’s super interesting. I mean, in some respects, that sounds pretty good. I mean, I think a lot of people presume that real estate investors want markets to just go up like crazy. Personally, I don’t. I I think a predictable, more stable housing market is what everyone should be hoping for. But obviously that has negative impacts for let’s say loan officers, for example. You see mortgage companies are hiring crazy over the last couple of years.
If we think that not only are purchase transactions going to go down, but refinancing is probably going to go down, especially rate-and-term refinancing. That probably means that there’s going to have to be some realignment in the industry if this is, in fact, the new normal. I’m not going to hold you to these exact numbers, but roughly speaking that we’re not going back to this crazy boom time that we saw over the last few years.

Mark:
Aesop’s Fable, the story of the tortoise and the hare, who wins the race ultimately is the slow and steady tortoise. It’s true. The corrections are difficult and can be painful at times. But when we look at the long run, we’re looking at something that’s more normal. You’re looking at less volatility, and you’re looking at an environment where people can make good investment decisions, good household decisions, good lifestyle decisions in a world where you get more balance.
It’s important to remember that we play a very active role in getting people into homes, and home ownership has been shown to be the single best source of wealth creation for middle class Americans, as well as a variety of other benefits. We do want to keep our collective societal eye on the ball of making sure that this is something that is accessible and affordable for most Americans. It’s also one of the things that uniquely differentiates us from many other countries in terms of our home ownership and how we do things. That’s part of our success as a society. All good reasons to be part of the solution.

Dave:
Well, I was thinking about some other questions, but that’s a great way to wrap this up. You just put a bow on this entire conversation, Mark. That was perfect. But I do want to give you a chance if there’s anything else you think our audience should know or where.

Mark:
Well, can I give you an econ joke? Would that go over well with your audience, an econ joke?

Dave:
It’s going to go well for me. Let’s hear it.

Mark:
Richard Thaler won the Nobel Prize in Economics. He did behavioral economics, which is basically the study of why people don’t act rationally from an economics perspective. A lot of what we’ve talked about here is the rational behavior. Why refinance when you would be paying a higher rate, things like that. He’s famously noted as saying, in many cases, we act more like Homer Simpson from The Simpsons than we do like Spock. I think that’s particularly apt in our world because people make decisions around real estate for a lot more than purely the money reasons.

Dave:
Absolutely.

Mark:
That’s why we’ll be good, we’ll be good in the long run.

Dave:
But I’m sure you, Mark, as an economist, you are perfectly rational, right?

Mark:
I do have a 30-year fixed rate mortgage, which is actually completely irrational. So no.

Dave:
Yeah, exactly. Everyone does it. I mean, even if you understand it, there are things that are not financially driven. You have other things influencing your decision making, for sure.

Mark:
I’m budget shock averse. I don’t want my mortgage to change.

Dave:
Right, right, absolutely. You want the stability, even though you know over the long run you might pay less with a different type of loan.

Mark:
Exactly.

Dave:
All right. Well, Mark, thank you so much. This has been a great conversation. If people want to learn more about what you and your team are doing at First American, where can they do that?

Mark:
Firstam.com is our website, and we also have a podcast that we do as well called REconomy.

Dave:
Oh, cool.

Mark:
You can find it on any one of your favorite platforms.

Dave:
All right. Well, thank you so much again, Mark, for joining us. We really appreciate it, and hopefully we’ll have you on again sometime soon.

Mark:
Thank you very much. My pleasure.

Dave:
Thank you again to Mark for joining us. I really don’t have much more to add here. Mark did such a good job of explaining everything he was talking about. Just popping in to say thank you all for listening, and we will see you next time for the next episode of On the Market.
On the Market is created by me, Dave Meyer and Kailyn Bennett. Produced by Kailyn Bennett. Editing by Joel Esparza and Onyx Media. Research by Pooja Jindal. Copywriting by Nate Weintraub. A very special thanks to the entire BiggerPockets team. The content on the show On the Market are opinions only. All listeners should independently verify data points, opinions, and investment strategies.

Mattie Bekink of the Economist Intelligence Corporate Network says the country’s property sector could stabilize in the second half of the year, which could “smooth out” its uneven recovery from the Covid pandemic.

Venture capital (VC) funding is highly sought after by entrepreneurs, but only about 100/ 100,000 ventures actually succeed in securing it, about 80/100 fail with it, and only about 20/100,000 ventures actually succeed after they secure it. Despite the scarcity of VC and the high failure rate, many entrepreneurs seek VC with VC pitches, or seek help from the business-school-and-incubator network to create “winning” pitch decks.

While most pitch decks include standard elements like product/service description, market analysis, management track record, and financial details, the reality is that pitch decks are a very poor predictor of venture potential – and sophisticated entrepreneurs and VCs know that. No one can forecast your potential from a pitch deck. As an example, about 10 of the world’s leading VCs rejected Steve Jobs, and about 12 rejected Google.

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That’s why VCs wait for Aha, i.e., real evidence (proof) of potential, not just words on a page. There are 4 types of Aha based on the real results of billion-dollar entrepreneurs. In this article, we will explore 4 types of pitch decks based on these 4 types of Aha that improves your chances of getting VC if you still want it when you get to the particular type of Aha – 94% of billion-dollar entrepreneurs took off without VC.

The Previous-Unicorn Pitch Deck: If you are an entrepreneur who has already achieved unicorn status with a previous venture, you will find it relatively easy to attract VC for your new venture. This type of pitch deck showcases your track record as a successful entrepreneur. For instance, Elon Musk’s pitch deck might simply state, “Hi, I’m Elon Musk, and I’m considering starting a new venture. I’ll provide more details later. In the meantime, send your checks to the following address.”

The Unicorn-Technology Pitch Deck: Entrepreneurs who have developed a billion-dollar technology that addresses a significant market need have a strong chance of securing VC. This type of pitch deck emphasizes the proven efficacy of the technology and its potential to disrupt the market. For example, a technologist like Herb Boyer might introduce his pitch deck by saying, “Hi, I’m Herb Boyer, and my colleagues and I have successfully pioneered the field of genetic engineering.”

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The Unicorn-Strategy Pitch Deck: Entrepreneurs who have already launched their ventures and demonstrated their unicorn-level strategy have an advantage when seeking venture capital. This type of pitch deck highlights the venture’s successful execution and market traction. An example could be Pierre Omidyar, the founder of eBay, saying, “Hi, I’m Pierre Omidyar. I started an online auction company and had hundreds of thousands of auctions last month and have the potential to grow into millions.”

The Unicorn-Entrepreneur Pitch Deck: Pitch decks from unicorn-entrepreneurs who have successfully launched a unicorn venture and are starting to dominate their emerging industry can generate significant interest from VCs who want to invest in a potential Unicorn-Entrepreneur due to leadership skills. These entrepreneurs have already demonstrated their ability to create a successful business, making it more likely that VCs will want to invest. For instance, Mark Zuckerberg’s pitch deck might include a confident statement like, “Hi, I’m Mark Zuckerberg. I recently launched Facebook and have already captured a substantial user base, starting with Harvard and Stanford students. Now I plan to expand to the rest of America and the world.”

The Best Pitch Deck

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The ultimate pitch deck is one that you don’t need because your venture is already growing rapidly without VC funding. Jan Koum’s experience with WhatsApp exemplifies this approach. Having built the company with angel capital and achieving profitability, Koum only accepted VC funding after eight months of persistence from a VC firm. A pitch deck from him might simply state, “Hi, I’m Jan Koum. I built WhatsApp with $250,000 in angel capital and we’re already profitable. So, actually, I don’t need your investment. Please, buzz off.”

MY TAKE: While pitch decks are all the rage, it’s essential to provide real proof of potential. Empty promises and inflated claims can only go so far. By learning from unicorn-entrepreneurs who have achieved remarkable growth without VC funding, you can gain valuable insights into building a strong business foundation. Remember, VCs are looking for tangible evidence of success. Aim to offer real proof that demonstrates your venture’s potential and your skills, and you’ll increase your chances of securing venture capital investment

MORE FROM FORBESExclusive: The Rags-To-Riches Tale Of How Jan Koum Built WhatsApp Into Facebook’s New $19 Billion BabyBy Parmy Olson

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WikipediaPierre Omidyar – Wikipedia
WikipediaHerbert Boyer – Wikipedia
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Escrow is a key part of real estate transactions and mortgage agreements, but many homebuyers and homeowners aren’t familiar with escrow and how it works. Escrow protects homebuyers, sellers, homeowners, and even lenders with real estate-related financing—it supports those parties throughout the homeownership lifecycle.

Let’s break down what escrow is, its role in real estate, and how it can be beneficial. 

What Escrow Really Is

Escrow is an account where funds are held by a third-party provider, such as a title company or real estate attorney, until both sides have met the contract terms. When the two parties have upheld their end of the agreement, the escrow provider will release the money or assets in the account to the necessary parties. 

Escrow can be used in any transaction and is usually used for larger purchases, such as car purchases. It’s most commonly used in a real estate transaction.

How Escrow Actually Works

In a home-buying transaction, the escrow holds funds until the buyer and seller meet the purchase agreement terms and close the deal. Buyers and their mortgage company must transfer the agreed-upon funds into the account, and the sellers must prove the home is in acceptable condition (via an appraisal, inspection, and/or buyer walk-through) before the deal goes through. Once the escrow provider confirms the contract conditions are met, each party receives its portion of the exchange.

Escrow also protects buyers and sellers throughout the process in case of a dispute. The escrow provider acts as a mediator in the event of an issue, and the money is held in a separate account from the buyer or seller, so it can’t be withheld for reasons not outlined in the agreement. 

Most homeowners also have escrow accounts for insurance and taxes, according to the terms of their mortgage. This type of escrow works by homeowners paying a monthly sum included with the mortgage payment to be set aside in an escrow account. The lender can then use the account to cover tax and insurance payments on the home. 

What Is an Escrow Account?

An escrow account is a bank account where funds are held and managed by a third party until the terms of a contract are upheld. There are two different uses for escrow accounts in real estate—one to hold funds during the home-buying process and the other for homeowners to set aside funds for insurance and property taxes.

Home Buying Escrow Accounts

Homeowners might first become acquainted with escrow accounts during the home-buying process. When putting in an offer, a buyer usually provides an upfront payment, called earnest money, to show the seller their commitment to the deal. This money is held in an escrow account until closing. As the deal progresses, buyers will add their remaining down payment, closing costs, and funds from the lender into that account. When the deal closes, those funds are distributed to the sellers and other parties needed to be paid, such as the title company or a real estate agent. 

Escrow protects both parties during the transaction. For example, if the buyer decides to back out of the deal, the seller will still receive the earnest money held in the escrow account. If the seller backs out or doesn’t meet the purchase agreement terms, the buyers will receive the earnest money back and walk away from the deal. 

Because a third party handles the escrow account, buyers or sellers may also need to pay escrow fees to compensate an agent or company for the paperwork and transaction fees. This cost is usually 1-2% of the home’s purchase price and is included in the closing costs. 

For Taxes and Insurance: When to Use Escrow

If you purchased your property with a mortgage loan, your lender will likely set you up with an escrow account to pay for insurance and taxes. As you pay your monthly mortgage, a portion of the payments will be set aside in the escrow account for the lender to pay for your homeowners insurance and tax bills.

Lenders estimate the total amount for insurance and taxes based on the previous year’s amounts. Since those bills can fluctuate from year to year, you may have over or underpaid those bills in your mortgage payments. 

The mortgage company must monitor the bill costs to ensure it’s charging you the correct amount. If homeowners have overpaid into the escrow account, the lender will issue an escrow refund. If the lender collects too little, it will notify you that you have an escrow shortage. You’ll need to cover the difference with a one-time payment, or the amount will be divided by 12 and added to your monthly payments.

Who Manages an Escrow Account?

Escrow accounts are helpful in real estate because an unbiased third party manages them.

The escrow provider, either an escrow agent, escrow company, or mortgage servicer, can help settle any disputes between contracted parties and keep the process fair according to the terms of the agreement. 

An escrow agent or escrow company typically handles accounts during the home buying process, and a mortgage servicer manages escrow accounts throughout the lifetime of the mortgage loan. 

Differences Between an Escrow Company and Escrow Agent

An escrow agent is an individual, a real estate attorney, or someone affiliated with the title company. An escrow company has the same responsibilities as an agent. Escrow agents and companies support buyers and sellers in the home buying process to ensure paperwork is correct and both parties follow the purchase agreement’s terms. 

What Is a Mortgage Servicer?

A mortgage servicer is a company that manages the tasks and logistics of a mortgage, including sending borrowers monthly mortgage statements. While the mortgage servicer handles mortgage logistics, including managing the homeowner’s escrow account, it may or may not be the same company that provided borrowers with the loan. 

How an Escrow Account Benefits You

Escrow has its benefits for multiple parties. Here are a few reasons you might want to use escrow as a home buyer, homeowner, or mortgage lender.

Home buyers benefits

As a buyer, an escrow account protects you by safeguarding your earnest money until the seller proves they have met all the purchase agreement terms and are leaving the property in acceptable condition. If the sellers don’t hold up their end of the deal, buyers can recoup the earnest money in the escrow account. 

Homeowners benefits

Escrow can be beneficial to homeowners as well. When homeowners pay into escrow with their monthly mortgage payments, they only pay 1/12 of the total property taxes and insurance bills. This spreads out the money a homeowner is responsible for and avoids larger bills due at once. Additionally, homeowners can avoid late payments or late fees since the mortgage company is responsible for using escrow funds to pay the bills on time. 

Lenders benefits

Escrow benefits lenders by ensuring borrowers pay their homeowners insurance and property taxes in full and on time. An escrow account also reduces the risk of a lien against the property. 

Escrow FAQs

It can be confusing to understand how escrow works. Here are quick answers to some of the most common questions people have about escrow accounts:

How long do you pay escrow for?

Homeowners pay escrow as long as they have a mortgage on the property. Homeowners can suspend paying escrow once the principal is paid off, and they can take responsibility for paying their property taxes and insurance payments.

Is escrow a good thing or a bad thing?

Escrow is neither good nor bad for homeowners. It’s all a matter of preference. If homeowners choose not to have an escrow account, they are responsible for paying taxes and insurance bills independently. Many prefer having all the expenses on one bill (mortgage payment) and choose to use an escrow account to hold the funds from the payment needed for taxes and insurance. 

For buyers and sellers, escrow is usually a good thing. It protects the buyers’ money and ensures the sellers have held up their end of the purchase agreement. It also protects the sellers if buyers withdraw from the purchase for reasons not outlined in the agreement. 

What is escrow on your house?

Escrow on the house typically refers to the escrow payments homeowners make to pay for their tax and insurance bills. The escrow payments are a portion of a homeowner’s monthly mortgage, and the funds are held in an escrow account until the mortgage company withdraws the money to pay for those bills in full. Once homeowners pay off the loan, the mortgage escrow account is no longer needed, and homeowners will be responsible for paying for insurance and taxes on their own. 

What is your escrow balance?

The escrow balance is the amount of money homeowners have sitting in the escrow account. This money comes from the escrow amount homeowners pay as part of their monthly mortgage payments. Mortgage companies use the escrow balance to pay the yearly homeowners insurance and property taxes.

Do you even need an escrow account?

If buyers purchase their home without a mortgage, an escrow account isn’t needed for taxes and insurance since they don’t have a lender to make the payments on their behalf. For homeowners with a mortgage, the lender may or may not require escrow. 

Typically, lenders require buyers to have an escrow account if they put down a down payment of less than 20% of the home’s purchase price, but some mortgage lenders give homeowners a choice. For example, FHA loans and USDA loans require escrow accounts. VA loans do not require them. 

What does it really mean to be “in escrow?”

The term “in escrow” means an asset (usually money) is being held until the conditions of the agreement have been met by both parties. This period in real estate is often 30-60 days, or however long it takes for the deal to close. 

How does escrow apply to real estate?

Escrow comes up multiple times in real estate when two parties need a neutral location to hold money or other assets until contract conditions (like a purchase agreement) are complete. It is also often used by homeowners with a mortgage to hold funds for tax or insurance bills that the lender pays on their behalf. 

What are the different scenarios where you can use escrow? 

There are two common scenarios where escrow is used in real estate. The first is in the pre-closing period, when buyers submit funds to an escrow account, and the funds are held from the sellers until the property is deemed acceptable and available to the buyers. 

The second use of escrow in real estate is mortgage escrow, where homeowners pay a set amount as part of their monthly mortgage payment into an escrow account for the lender to pay the insurance premiums and property taxes.

In addition to using escrow with real estate, escrow accounts can also be used in the following situations: 

• Rent payments: Renters may be able to pay rent into an escrow account, ensuring renters get their money back if a landlord isn’t maintaining the property according to the lease agreement.
• Large transactions: Escrow accounts can be useful for other large transactions, such as a car, to give you a stronger sense of security. You can contact an escrow agent if you’d like to incorporate escrow into your transaction, or there is sometimes an option to use escrow with online purchases. 
• Stock: For employees who are compensated through stock, those shares are often held in an escrow account until a set waiting period has passed and employees can sell the stock.

What is an escrow waiver, and when should you get one?

An escrow waiver is an exemption that allows a homeowner to forgo an escrow account with their lender and cover the taxes and insurance payments themselves. If your lender requires you to have an escrow account and you would prefer not to have one, you can ask your lender if you can apply for an escrow waiver. 

Some homeowners prefer to handle insurance and tax bills and get an escrow waiver to control the payments. If you obtain an escrow waiver, remember that instead of spreading out property taxes and insurance payments over 12 months, you will be responsible for the total cost of each item as they’re due. Take note of when those bills are due, and be sure to have the total amount ready on the billing date to avoid late fees.

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

Want to grow your small business? Acquisitions can help you efficiently break into new markets, expand your customer base, and increase your offerings without building them yourself. It helps diversify your portfolio of products or services, which reduces risk and helps your company be more resilient to economic uncertainty.

But there are risks, too. There may not be a cultural fit between the two companies. The due-diligence process may not reveal potential problems, including legal, regulatory compliance, and financial issues. The acquisition may be poorly executed, leading to operational problems and the loss of key personnel. The purchase may be expensive, leaving the acquiring company with excessive debt.

Robyn Streisand, CEO of The Mixx, a strategic creative agency, began growing by acquiring complementary businesses. She reduced her risk by purchasing companies she had worked with for years. Creative Captain Group was her second acquisition.

Version 1.0 Of The Mixx: A Strategic Creative Agency Is Born And Focused On DEI

Back in 1997, long before others realized that a strategic creative agency could build a business by strategically connecting brands with diversity, equity, and inclusion (DEI), Streisand did. Interest in DEI grew, as did The Mixx.

Interestingly, Streisand thought certification as a woman-owned business was for office furniture and IT staffing companies, not creative businesses. “[Back then,] there weren’t a lot of companies that knew what certification was or meant, especially in the marketing media and communication space,” she said. But her client, Greta Davis at Time Warner, for whom she was developing its first-ever supplier-diversity program, asked her to get certified. So she did.

Version 2.0 of The Mixx: Growth Through WBENC And NGLCC Certification

Since then, she’s become a huge proponent of certification. You have to get to the table to be considered for a contract with a large company, and that’s just not happening enough for lesbian, gay, bisexual, transgender, queer or questioning, intersex, asexual, and more (LGBTQIA+)-, minority- and women-owned businesses. Corporate America and government have a significant role to play in helping underrepresented entrepreneurs grow their businesses.

Growth through certification became Streisand’s 2.0 version of The Mixx.

“The Mixx’s core competency is serving underrepresented communities, whether it’s women, LGBTQ, African American, Asian, Hispanic,” said Streisand. Campaigns can be aimed at internal or external audiences. The Mixx builds the bridge from the brand to the target market by diving deep into research to reveal new insights into what and how to communicate. The Mixx then quantifies the return on investment (ROI) on the campaign.

Version 3.0 of The Mixx: Growth Through Strategic Alliances

In 2014, Streisand launched the first-ever collective of certified LGBTQ-, minority-, and women-owned businesses called Titanium Worldwide. Titanium was created as a growth strategy for The Mixx. “We were being asked to compete for RFP opportunities and getting eliminated in the first round because we were too small,” said Streisand. The collective was version 3.0 of The Mixx.

Agencies are certified-diverse with Women’s Business Enterprise National Council (WBENC), National Minority Supplier Development Council (NMSDC), or National Gay & Lesbian Chamber of Commerce (NGLCC), and any spend counts towards a corporation’s supplier-diversity objectives. Capabilities include consulting, strategy, marketing, communications, creative, execution, media, engagement, technology, and analytics. Each agency operates with a shared mindset and a common way of working together.

“For the first three or four years, we were the shiny toy,” said Streisand. “RFPs were coming in left and right.” Brands were focused on multicultural marketing. Before you knew it, Titanium had under its umbrella 23 agencies that are all independently owned and operated. A few years later, Titanium won its first agency of record (AOR).

Now corporations want their agencies to be streamlined, more cost-effective, agile, and nimble. From an operations perspective, doing this with independent companies took much work. Streisand began to understand why creative agencies buy other agencies.

Version 4.0 of The Mixx: Growth Through Acquisition

The Mixx and Captain Creative Group were doing a ton of work together. “We are two agencies that put relationships first,” said Streisand. “For 26 years, The Mixx has been working to help create the world we want to live in–to help brands realize that DEI isn’t just a moment in time, but a movement. Captain Creative’s founder and CEO Lisa Foti and I have been lifelong friends and collaborators in inclusivity and creativity.”

Captain Creative brings industry experience in experiential events, marketing communications, and production design for life sciences, technology, and consumer brands. Both agencies take an audience-centric, human-focused approach to marketing.

Streisand is the visionary. Her talent is seeing what’s down the road. Foti’s core competencies are operations, resourcing, setting up teams, and scaling. “We were doing so much work together, and it just became the natural evolution of our relationship.”

“Robyn came to me at the end of last year and said it just makes sense for us to work more closely together,” said Foti. “I was basically working half-time for my company and half-time for Titanium and The Mixx. It is an opportunity to work together to create something bigger.”

“I love working with the Mixx team and Titanium members,” said Foti. “It is a match made in heaven.” They each get to do what they love doing and are good at. And the icing on the cake is that it is an opportunity to collaborate with like-minded people, people you know and trust. “I trusted bringing my clients and team to The Mixx,” she said.

Integrating the systems and technology of two different companies takes work. But they are not even six months into the merger and are about 85% there.

How are you growing your business?

So, the day has come to finally figure out how much your rental property income will affect your child support payment. You won’t be surprised that many states consider that pretty penny a critical component when calculating these payments.

As with any financial analysis, it’s essential to understand how to break down the numbers, especially regarding child support. In most cases, parental income is calculated in its entirety. You’re going to have to provide proof of all of your finances. For rental property owners, the court will pay particular attention to the total net income of your rental.

So, how is rental income calculated, and how does that play into child support payments? We’ll give you the low-down on figuring out your rental income so that you can prepare yourself somewhat for the road ahead.

What Gets Calculated in Child Support Payments

The main factor that gets calculated in child support payments is parental income—the total amount of any salary or wages. This salary includes both taxable and non-taxable income.

The formula for calculating child support payments can vary depending on your state. When determining gross income, many factors can come into play besides salary. These factors may include:

• Rental income
• Business income
• Work bonuses
• Pensions
• Investments

One thing to note is that many states allow for deductions from gross income for things like:

• Property taxes
• Union dues

Aside from monetary obligations, some states also factor in the following:

• How much time the child spends with each parent
• Costs associated with health insurance
• The age of the child
• Childcare costs

How To Calculate Rental Income For Child Support

If you’re wondering how to calculate total rental income for child support purposes, the payments are based on several factors, but in a nutshell, here are the top three steps that should take place.

Determine gross income

First, how much cash is the rental property bringing in? Let’s use $1,000 in rent for each month as an example. At the end of the year, we have a total of $12,000 in gross rental income. We’ll remember this number as we move on to the next step.

Factor In deductible expenses

Yes, you can factor expenses into the equation. To make things simple, let’s consider the following expenses:

• Rental property taxes: $500
• Repairs and maintenance costs: $1,000
• Utilities: $1,200
• Property management fees: $2,500

In this case, the total allowable expenses are $5,200. However, there are still some expenses associated with the property that you can deduct from your gross income, such as your mortgage’s tax and interest. Let’s hold on to that $5,200 as we move on to the next step.

Calculate net rental income

You want to deduct the total allowable expenses from the gross rental income to determine your net rental income. Based on the examples above, we would use the $12,000 gross rental income minus $5,200 of total allowable expenses, equaling $6,800 in net rental income. So, the $6,800 would be used in the calculation to determine the child support amount.

Remember that the amount of child support will vary based on your state. It’s always a good idea to consult with a family law attorney or child support professional for guidance on accurately calculating rental income and child support payments.

Check Your Local And State Laws

Child support will be calculated differently depending on the state where you live. Often, states will provide child support calculators, which are a great starting tool for those strictly looking for an estimation; these calculators tend not to get into the nitty-gritty of finances, however, as they don’t factor in your specific circumstances. When looking into your local and state laws, here are a few formulas or models that you might see:

The Income Shares Model

Forty-one states use the income shares model. So, think of this model as the financial life a child would receive had the parents stayed together. For this, you’ll use both parents’ incomes.

The Melson Formula

Three states use this model: Delaware, Hawaii, and Montana. Think of this as a more extreme version of the income shares model. This formula incorporates additional factors and expenses, many designed to consider parents’ financial needs.

The Percentage of Income Model

Last but not least, six states (Alaska, Mississippi, Nevada, North Dakota, Texas, and Wisconsin) use the percentage of income model. This is a flat or adjusted percentage of the non-custodial parent’s income.

Rental Income And Child Support Payments FAQs

Here are people’s top questions when calculating rental income and child support payments.

Does child support count as income for renting?

It depends. This is an ongoing debate amongst landlords because there is a risk of the recipient of the child support not being paid at all—it happens quite a bit.

If you are a landlord considering counting child support as income, you want to look at the things like the court order and when payments are received. When it comes down to it, let’s say that the child support income is less reliable than you initially thought, and you decide to evict a tenant and collect the balance due. Will the state allow you to garnish the amount as normal income?

Since the Internal Revenue Service (IRS) doesn’t consider child support taxable income, I would not consider it in the rent calculation unless you have a HUD-specific home.

According to hud.gov, “[rental property] owners must count alimony or child support amounts awarded by the court unless the applicant certifies that payments are not being made and that he or she has taken all reasonable legal actions to collect amounts due, including filing with the appropriate courts or agencies responsible for enforcing payment.”

So, does child support count as income for renting? It depends on the situation and, if not required, the risk the landlord is willing to take.

What income is counted for child support?

The income counted toward child support can exceed just your salary. In some cases, gross income can include recurring capital gains or unrealized income, winnings from a day of gambling, rental income, and sometimes even interest earned on retirement accounts. Typically, any additional income outside of salary is considered.

Sometimes if C-corporations or S-corporations hold your rental properties, the court may even decide that the retained earnings are subject to child support calculations. If, for some reason, you disagree with the court’s order, perhaps you think an income source shouldn’t have been included, you can elect to go to the court of appeals to review the record. The review is to see if a legal mistake was made and if that mistake affected the overall outcome of the trial court case.

Is money from rental properties considered income?

Sure is, but only the net income from a rental property. So, what does that mean? The term “rental income” doesn’t necessarily mean you go off the total amount of rent payments coming in. You can deduct allowable property expenses from that amount, which will help you calculate net rental income.

This is because the “cash flow” is the amount received in rent minus what is being paid out, including the interest part of the mortgage payment, property taxes, insurance, and maintenance costs. Not all things you consider an expense are honored by the court.

For example, in a Colorado Court of Appeals case, “the trial court found that the principal portion of the mortgage payments did not qualify as ordinary and necessary expenses for purposes of calculating child support.”

It’s All In The Numbers

According to the Census Bureau, “Parents who received regular child support payments received a monthly average of $604 and a monthly median of $396 in 2017.” Although there hasn’t been substantial growth in the average year after year, the number does seem to increase continuously.

If you own a rental property and, for whatever reason, are going your separate ways with a spouse, make sure you truly pay attention to all of the numbers, especially your total allowable expenses. Those expenses are crucial in determining your overall rental income and the amount calculated into a child support payment.

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

When asked about the source of his genius, Albert Einstein had no doubts. ‘I believe in intuitions and inspirations. I sometimes feel that I am right. I do not know that I am,’ he told The Saturday Evening Post in 1929. As entrepreneurs, a lot of what you deal with is unknown. You need to make hundreds of small decisions every day and every now and then, big decisions. Sometimes, the research data, although insightful, does not provide the exact answer on which decision to make. So, how do you decide? Well, you need to trust your ‘gut feeling’ or intuition. So, what is that and can you develop your intuition?

The scientific understanding of intuition begins with a laboratory game known as the Iowa Gambling Task. Participants were presented with four stacks of cards on a computer screen. Each time they turned a card, they would receive either a monetary reward or a penalty. Two of the decks tended to offer relatively large rewards, but even bigger penalties – meaning that, over many turns, they will lead to a loss. The other two decks provided relatively small rewards but even smaller penalties, meaning that they are the safer option. The participants aren’t told which decks are going to be profitable, but after about 40 attempts, many people start to form a hunch of which ones will lead to bigger wins. This ‘hunch’ is actually happening on a subconscious level. How?

Researchers at Leeds University analyzed a quite a few studies and research papers on intuition. They concluded that intuition is a very real psychological process where the brain uses past experiences and cues from the self and the environment to make a decision. The decision happens so quickly that it doesn’t register on a conscious level. The human brain has two ‘operating systems when it comes to making decisions.’ The first is quick, instinctual and effortless. This is where our intuition lies. Intuition works by drawing on patterns collected by our experience and when we have to make a quick decision about whether something is real, fake, feels good, feels bad, right or wrong, we draw on these patterns. It all happens ‘offline’, outside our conscious awareness. The second operating system is slower to respond. It’s more analytical and deliberate and it’s conscious.

So, the good news is that every person on the planet has intuition but not every person chooses to develop or even listen to it. Here are some insights to better develop your intuition as an entrepreneur.

Listen quietly. It’s sounds simple enough and it is. No tricks here. Your intuition can’t talk to you if you’re not listening. When you start to take notice, good things will happen. Just try it and listen quietly to your own instinct about a potential decision.

Trust your gut. When a word like ‘gut’ teams up with a word like ‘feeling’, you know there has to be a good reason. And there is. Research suggests that emotion and intuition have a physical presence in our gut. The gut is lined with a network of neurons and is often referred to as the ‘second brain.’ It’s known as the enteric nervous system (ENS) and it contains about 100 million neurons, which is more than the spinal cord and peripheral nervous system but less than the brain. This is why we get ‘sick’ about having to make a tough decision or knowing we’ve made a bad one.

Train your intuition. It’s hard to make big decisions without the practice of making little ones to hone your gut instinct. So, trust yourself on little decisions, try and predict little things, like the car ahead is going to turn left, the person next to will order dessert and so on. As you start making small decisions in your company based on your gut instinct, it will help you make the bigger decisions with confidence.

Trust the Feeling. You’ll know your intuition is there because you’ll be able to feel it. You’ll feel it in your belly and it will goosebump your skin, send a shiver down your spine, race your heart and quicken your breath. Sometimes it’s even more subtle and the only way to describe it is as a ‘knowing’. You’ll feel when something is right and you’ll feel when something is off. Start trusting the feeling.

Lose negative thoughts quickly. Negative emotions will cloud your intuition, which is why when you’re angry or depressed, bad decisions can happen so easily. Research has backed this, finding that people made better intuitive choices when they were in a positive mood as compared to when they were in a negative mood.

Surround yourself with great people. If you have people around you that just drain your energy, they will add to the noise and make it more difficult to hear what your intuition wants you to hear. Chances are that you already know who they are. Keep people who enrich and empower you and walk away from those who drain you.

Pay attention. Start being more aware of your surroundings. Go for walks with no headset or Air Pods. Really talk to people. Have open interesting conversations. Read more. Be more curious. The more information you are able to gather from the world around you, the more the intuitive, subconscious part of your brain has to work with, the more accurately it will inform your decisions.

Connect with experts. You will never know everything. A better approach to learning is to acquire the knowledge and experience that experts can provide. Experts have also had to make lots of decisions and can share their failures and wins. They can tell you the little things they learned to trust their gut. All of that information can be synthesized into your ‘intuition’ to help fine tune your future decision making.

Sleep well. We all need to dream. Dreams are the brain’s way of processing information that’s left over from the day or even our aspirations. They are rich with valuable data, experiences, memories, and learnings so they can work hard if we let them. Paying attention to dreams can provide information that we may not have access to when we are awake. Before you fall asleep, turn your thoughts to any unresolved issues or problems but in a positive way. Think about possible options or resolutions as you’re falling asleep. You might be surprised what you remember when you wake up.