The Almost Daily 2¢ - Perception is Reality… Until it’s Not

The perception of affluence and sophistication is undoubtedly an important factor in American culture today.

The notions of “aspirational” consumption, “upward mobility” and “urban chic” were coined not merely as an exercise in pop culture marketing but, I believe, because they accurately reflect that sentiment shared by millions of Americans whose only experience is easy prosperity and consumption.

Although generations “X” and “Y” are, in general, more educated and “professional” than past generations, most have little to no real experience with a prolonged period of economic contraction and its deleterious effects on self and society.

Sure, some wised up during the aftermath of the dot-com bust but that contraction was not only artificially cut short and postponed but its mitigation came on the back of an unprecedented era of easy credit and lending leading to a massive buildup of debt by average Americans.

Is it any surprise that we find ourselves in the latest economic predicament?

American culture and our media routinely celebrate a false reality.

Whether it’s the adoration of our celebrities with their faux appearance and character and endless awards ceremonies for what amounts to the accomplishment of nothing of any importance, or our celebration of the wealthy, especially those with either dynastic or ill gotten gains, or our continual “trend following” even if it leads us to living above our means, Americans seem dissatisfied with the typical lot in life.

Witness a recent article published in the Boston Globe titled “Look Homeward, Gen X” by correspondent Kate M. Jackson.

The article chronicles the home buying exploits of a couple of 35 year olds who, apparently, represent the new “Autonomous, Web-wise, and tenacious” Gen X homebuyer which the Realtors regard as the “savviest home buyers around”.

Yet, a little creative digging (hattip Hard Rain) reveals that this young Gen X couple is in debt to the tune of $645,400 with the majority their principle balance being financed with adjustable rate loans leaving them minimally with a $15,400 negative equity position.

The couple financed their $245,000 Salem condo, purchased at nearly the absolute zenith of the market in 2004, with a first loan (made possible by Fannie Mae) and second loan (piggyback model… i.e. no deposit) totaling $260,400… yes… that’s right they hold $260,400 of debt on a $245,000 condo purchase.

After deciding to buy a single family home last year, the couple were unable to sell their condo (or at least unwilling to take a loss) and, like so many other bay state home owners, became landlords renting the unit through craigslist.

In 2007, the “savvy” Gen X couple purchased their new home, again utilizing 100% financing with a first loan (made possible by Fannie Mae) and second loan totaling $385,000 the exact purchase price of the home.

Celebrating this couple’s foray into what will likely result in default and insolvency and representing it as a new generation approach to self assured and independent high finance is truly appalling and provides yet another measure of how off balance our culture and disgraceful our media have gotten.

As they say, only when the tide goes out do you discover who's been swimming naked and with the economy firmly on a downward trend, soon we will all see the true reality.