interesting conversation

As many people have probably read recently, Money Magazine came out with their 2007 list of the 100 best places to live, and a neighboring community, Middleton, WI took first place. Honestly, of all the great communities in Dane County, I was surprised that Middleton took first, but that's a different post for a different day (let's just say that I thought it would be Verona or Mount Horeb, that I didn't even consider Middleton until I heard the announcement on the news). We were discussing this with some friends this weekend, and we were talking about the average incomes and housing prices around the county, and speculating what impact being "#1" will have on Middleton and the surrounding communities. A friend of ours owns an established small business in another affluent Dane County community told us about a trend he's seeing a lot recently. In order to protect his anonymity, I'll just say that his business is automotive related and it's not a dealership. He says that at least several times a week, he will have a client attempt to pay their bill with multiple credit cards that get declined. He says they'll run through a small stack before hitting one with enough free credit to pay their sub-$500 bill. Now why is this even worth mentioning? First, this is something new he's started seeing in the past six months. Second, it's occurring very frequently, at least several times per week. Third, the people that are doing it are living in McMansion-type homes and often driving $35,000-$60,000 vehicles. When you start to think about it, it really doesn't add up. Average household incomes of $85,000, average house prices of $350,000, and you rarely see those $350,000+ homes with an older Accord and beat up truck out front. Generally, the garage contains vehicles that are less than three years old, and more often than not they are SUVs rather than economy cars or practical sedans. I guess what I'm saying is that many of these lifestyle choices aren't sustainable, and we're starting to see the results of 5-8 years of rapid real estate appreciation and spend-spend-spend attitudes. Anyone who's following the financial news these past two weeks knows what I'm referring to. Mortgage rates are going up rapidly, mortgage firms are going under, the stock market is shaken, and many investors are making decisions based on fear. Cheap money is drying up. I'm of the camp that the correction is overdue, but we'll see what the future holds.