That's a lot size, not a house size brotato. That's 0.16 acres, which is actually below the standard lot size in the US for most houses. Standard lot size in the US is around 0.25 acres.

2000sqft is a larger home, but not absurd if you're married and have two kids.

Nobody needs a luxury car. Nobody needs to eat at nice restaurants. Nobody needs vacations in Europe. Nobody needs a $1000 phone.

But if I had to choose one thing where I have no problem spending more than what is strictly needed, it's going to be the place in which I'll be spending the vast majority of my time for the rest of my life.

If it makes you feel any better: for the low end of my range ($1.5M), you're not going to get that 7000 sq.ft. You'll be buying a house on a 3500 sq.ft. lot, so the argument still stands.