The Willing Suspension of Disbelief

A close professional friend who moved on to start his own enterprise in green marketing is much missed. I used to get insights, quips, quotes, and sometimes whole essays from him, mostly on real estate and the environment. I was reading an old email of his from a few months ago (now that’s OLD) and it brought me back to my blog.

The great earthquake that has shaken real estate in America has been given many names–“Mortgage Meltdown” is a favorite of mine.  Volumes have been written, and continue to be, about how we got where we are.

To me, it had two drivers–and has revealed one underlying fundamental about the American psychology in home buying.

First the drivers:

1) The growth of unregulated speculative investing (a big hunk of it in trading mortgage portfolios containing damaged goods) by the same financial institutions that provide retail banking, including home loans, for millions of us.

2) The prolonged, sticky unemployment that grips the country–brought about by much more than the mortgage meltdown.

And now, the psychological ingredient. Here’s where my friend’s email comes into play. He wrote to me about a phenomenon that all real estate agents know, and how it played in the meltdown:

“People rarely find or buy the house they say they want. Instead you’re presented with what you might have thought you didn’t want, but what’s available, whereupon you give in and start finding ways to feel good about it and about yourself.”

 “In America a counter-truth took shape. People were presented with what they thought they couldn’t afford, whereupon–fully aided and abetted by novel mortgage bankers and just about the entire supply chain of modern capitalism — they gave in and started finding ways to finance it.”

It happened, in spades, and we will be paying a steep price for it–in lost real estate values, in foreclosures, and in financially devastated American families for years to come.

What was the psychology that ran rampant? What happened in our real estate markets between about 2002 and 2007 (depending on location)?

My Dad (an accountant) loved the theatre. It was his lifetime avocation. Theatre is often about illusion. My Dad loved to talk about what actors and directors have long called “the willing suspension of disbelief.”

To me, it always meant that great theatre involves a script, actors, directors, sets, and costumes spun together to create an environment where we start believing in things that we ordinarily would not–things that are not real. It’s fun, engaging, and entertaining. It what makes great theatre a great getaway for our minds.

In 2002-2007, our “willing suspension of disbelief” became widespread and incredibly damaging. It was all about one thing. What could we really afford to pay for a home, and on what terms?

The other day, over coffee, I made a new acquaintance. “We just moved here from Las Vegas,” she said. “We’re renting here, and we’re renting our home there too. We couldn’t sell it. We paid $650,000 for it a few years ago and we can’t get $350,000 for it today.”

What are the chances that future generations will be similarly tempted–and surrender? How might that be prevented? Let me hear from you.

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