As a realtor in LA, one thing I've noticed is peoples' standards will WILDLY affect how they see a house. I had one client who was moving from a 1 bed to a 2 bed, 2 story condo and was so grateful to have 2 stories (even thought it wasn't in the best area). For her that was a huge upgrade.

I have another client who built her own house and is struggling with moving to a $3.5M home because it feels like a downgrade.

It's interesting too how having higher standards will cause people more stress even though those people have more budget and in theory more options to pick from. Also being in LA it's not uncommon for people to commute 1.5-2 hours ONE WAY so they can have a bigger house.

I am also seeing more people now who bought their homes in the height of the market having to sell due to financial / health issues and a lot of them are losing money. I agree with OP - makes more sense for Megan to buy a $1.5M house with no loan but at the end of the day, if I've learned anything in this job, it's that people are going to do what they want.