Has consumption gone out of style?

A recent article on TheDailyBeast.com reported that Kathleen Fuld, wife of the former CEO of the now defunct Lehman Brothers, was seen exiting the Manhattan luxury purveyor Hermès with her goods in a plain white bag instead of a signature orange Hermès shopping bag.  While her husband no longer sits atop one of the largest investment banks in the nation, the couple is obviously far from impoverished.  One might think Mrs. Fuld’s attempt to veil her ongoing lavish spending habits was out of shame or guilt over her husband’s blunders which led the 158-year-old investment bank to its demise, but it’s more likely that ostentatious consumption has simply gone of out style. 

Richard Fuld has been described as the symbol of everything that was wrong with Wall Street.  Is Mrs. Fuld the symbol of everything that was wrong with Main Street?  After all, the culture of conspicuous consumption was practically a national sport until recently.  Who needs a savings account when you’ve got a $20,000 credit limit on your Visa?  Why drive a road-weary Honda when you can lease a shiny new Mercedes?  Equity in your house?  Cash it in and buy a boat!  Remember those days?  You should; they weren’t too long ago. 

As a REALTOR® specializing in negotiating short sales for homeowners with negative equity, I have witnessed the long-term effects of irresponsible spending and borrowing on a more intimate level than most.  I regularly sit at kitchen tables with homeowners who are struggling to make their mortgage payments and answer questions about how a short sale will affect their credit and when they might be able to buy a house again.  The men inevitably declare that “it’s a business decision” and remain emotionally detached while occasionally letting slip a hint of anger.  It’s the women who cry.  The women are the ones who picked out the paint colors and the window treatments and trekked the aisles of home improvement stores for the perfect dining room light fixture.  The women have appreciated the large capacity front-loading washing machine and the stainless steel side-by-side refrigerator and are now wondering if they can take those things with them when they move.  The women are the ones worried about what the neighbors will think and hoping we can sell the house without putting a sign in the yard.  Lately though, I’ve noticed a significant change in the attitudes of those considering a short sale. 

When I first got into the business, the stigma surrounding short sales was much greater than it is today.  A short sale was seen as “almost as bad” as a foreclosure.  Today, however, with property values in some areas at less than 50% of the mortgage balance, many homeowners are looking for ways to “start over.”  Short sales are now viewed as a more responsible way to get out from under the weight of a bad debt without simply walking away and leaving the banks to deal with the mess left behind.  Many people who choose to negotiate a short sale are able to cut their housing expenses by as much as two thirds and end up living in a comparable property in the same neighborhood.  Instead of boasting about that new pair of Kate Spade sunglasses, people are starting to brag about cancelling their cable and selling their ATVs on Craig’s List.  Getting rid of hundreds of thousands of dollars in negative equity and significantly reducing your cost of living has become another thing to brag about.  For many, a short sale is a way to close out one chapter of life and move on to the next. 

One client of mine recently confided that she and her husband plan to start a family soon.  They’ve decided to pursue a short sale in order to decrease their cost of living.  Instead of staying in their current home with mortgage payments totaling $2,500/month, they plan to rent a more modest home for $1,000/month while saving for a down payment on another home in the future.  In doing so, they feel they will be providing a healthier environment for their future children by teaching them the principles of living below your means.  Perhaps there are more important things in life than upgraded cherry cabinets and Prada purses?  This kind of thinking is a far stretch from the “more, more, more” attitudes of the past ten years.  It seems living more conservatively and staying within your means is finally en vogue.  Ironic isn’t it?  Personally, I find it refreshing.