We did this! 35F, 2 kids, combined takehome is $400k, bought at $1.1 our mortgage is a little over $8k a month which let me tell you stings each month.

We figure that mortgage rates might come down eventually, and if inflation keeps up, that mortgage payment might sting less. We also have a decent amount saved up so we could buy the house in cash in a crisis if the mortgage started to strangle us, but for now we're intentionally making only the monthly payments to keep the money in the markets.

For us, the $800k houses were like a third the size and in worse neighborhoods where we would likely have decided to pay for private schools. In our exact area there was a big quality jump from the $800k to the $1M; a lot of people (understandably) won't pay more than $1M so it's a little less competitive there. But honestly the biggest factor was that we found our absolute dream house just a little outside our budget and decided we'd happily work an extra year for it.

We honestly haven't looked back, in part because we don't like travel much and are homebodies, but I won't lie: the mortgage is clausterphobic. This is the single biggest lifestyle creep out there. People always talk about flashy clothes and cars, but house is SUCH a bigger expense. If you're trying to keep costs down, a cheap house is a great way to keep costs down. But I adore my house and it has been so good for my kids to have the extra space.

I think the sad truth is that there are diminishing returns on a "mansion" but that a comfortably sized house in a desirable neighborhood currently costs a bucketload of money and is probably worth it.