It's not as tightly correlated as the per capita cheese consumption is with the number of people who die by becoming entangled in their own bedsheets. https://www.tylervigen.com/spurious-correlations

Yeah I totally get your line of thinking regarding $700k vs $900k but it's ignoring your equity that you could cash out now. My answer did ignore the cost of selling your house, which is significant though.

I'm not totally familiar with construction loans. Some are due at the end of construction (i.e., you need to refinance) and some convert to a mortgage. Either way, you are going to have a higher effective mortgage rate in the end.

It's a super hard decision. But I wouldn't discount the time/headaches/cost over runs that come with renovating. It's hard to put a price on, but it can be a really high workload for you.

The construction cost seems low if you are talking about addition plus remodel plus adding a garage etc.

Your current house is worth $900k. You think you can put up about $600k in the remodel well that puts you as $1.5M and you think a $1.6M house is unaffordable.

It's hard to compare your own project to rennovations/flips in your area. They are likely making part of their profit by doing the work, where you need to hire contractors.

You might want to look into the financing side more too. How do you intend to get the capital for the renovation? I don't think a HELOC is an option since they will cap at 85% of your equity in the property.