Here's what I took: The anecdote of her cousin Wayne that she tells in the beginning is true.
At first I wrote the story off as a simple and needless tale based used for shock value (poor writing), but it's so over the top and grotesque that as a viewer, it's so ridiculous that you don't want to believe it, or even regard it as a necessary bit of information because she tells it as a fake story to make Alex squirm. So you forget about it, because at this point, Scarlett is depicted as facetious and maybe a bit unstable. Jumping to the end, you find out that she really committed the heinous acts that she describes in the beginning. Alex is a part of her subconscious, the fact that he has developed sentience within her own delusion is a deeper part of her subconscious that is condemning her as she is unable to process her own guilt (EG her heavy alcoholism). It's a very interesting way to tell a story, as she takes the backseat in the focal point of the story that is 100% in her own head. Now whether she is "delusional", or there are actual spiritual forces at work within the two realms of Alex's initial reality, and the second one where he is her neighbor is sort of up to interpretation. Notice the scene where Paige, (Alex's wife) is counting peas in the kitchen, and it immediately swaps to her holding a glass of milk, as if it's a glitch, this is a tell that he is not in the realm of true reality when they knew each other, or when they're neighbors. Alex is the embodiment of her guilt and shame and also the judgement of maybe a supernatural entity, so he isn't necessarily a person, more of a shifting presence. Alex never existed, she conjured him up.