The only rug I would spend much more than $1000 for would be a real Persian rug. Not even Indian or Chinese rugs. Perhaps a really big karastan. We have one karastan we bought 38 years ago that looks brand new, and one my mom bought in 1946 that is is only a bit shabby, but in the good way "orientals" can be. The biggest of our true Persian rugs was bought by a uncle in the 1920's, has been in continuous use the whole time, as is still perfect.
On the other hand if I were buying anything more contemporary I wouldn't spend more than a thousand because what looks good today may look like a double knit polyester pant suit in a few years.

I think what's "good enough" is such a personal call. In our new house we're doing lots of indigo and orange, but I like to change things up. I could very well get tired of those colors in a few years. I'm not likely, regardless of ability, to spend 5K+ on a rug in those colors, because it could get sold or put in storage when I'm ready for a change. I spent ~$1500 each on the big rugs going in my living and dining; they're both hand knotted wool.

Looking locally, an increased price generally gets more knots per inch, which makes a finer rug. I'm sure it's a better quality wool. The dyes were different, but I don't remember exactly how. While I could see a difference in the 1k and 5k rugs, I couldn't tell a difference in the 5k and 10-15k rugs.

If I were looking for an heirloom quality rug, I'm sure the budget would increase. I'd look at the expected length of use and go from there. I decided the 1k rug was the best cost/quality combo for me; of course YMMV.

Karastan are good quality rugs, but not hand-knotted. They are machine made in the style of "real Persian rugs". They are made in the US which is good for those who like to support our economy.

It all comes down to what you like. Don't buy a rug for investment purposes. The flat weave rugs are hand knotted, but not as soft. We have two of those and I like them. I have machine made rugs and I also have antique orientals and one newish hand-knotted. I like them all.

I have linked to a site I just found that explains it pretty well. Good luck in your search. I really like the look of your sectional-looks grey on my monitor.

Here is a link that might be useful: Rugs

Get what makes you smile. Have you looked online? There are many reviews (I like being able to read reviews!) at Overstock where people say they saved a ton of money over what they would have paid locally.

I'm with the others in that if you go with anything other than a rather boring neutral, you might change your mind on colors in a few years and be glad you didn't sink too much $$ into the rug.

I have an ick factor with rugs and also change color schemes every so often so like new rugs best rather than something that will last a lifetime. I have several of those in storage but the colors aren't what I am using right now although they are good rugs so I would get something that won't make you feel guilty when you feel like replacing it.

Update: we decided to order a rug from Overstock, because the colors and design are possibly more important than the quality of construction of the rug. Obviously its much less expensive than the one I asked about. If it doesn't work, we'll return it and start over. When it arrives, I'll be back to ask about chair fabric and pillows. Thanks all.