Things are going to be slow here tonight so you might want to bump your thread up a couple of times in the next few days.
BTW I am a contractor with a RE license. Someone else on another thread alluded to the possibility that it would be more of a buyer’s market regarding remodels and it can be. I know when I need subs, it has been way easier on the house I am finishing now verses the last house I built.I had an aquaintance call me and say he would do all the tile work just for the cost of the labor for his crew.This is a good guy too.
If you have a small yard, an addition can hurt you ,going second story is much more expensive and you really want a good contractor for that.

I also feel it is risky to put too many eggs in a basket right now. So if you don’t just have lot’s of cash around think twice about dumping money into a house(or using any credit). I have a friend who is in a similiar position as you find yourself in. I asked him to think about holding off on major upgrades to see where things go. He has a house which is not his “Destination house” and remodeling and adding on isn’t going to make it be that way. I suggested to him that he leave it as it is and consider having it be a rental for retirement and using his buying power to get the house he wants if prices drop considerably.

If you decide to make do with what you have you might consider a cheap unpermitted garge conversion that can be undone easily or a second hand travel trailer. The kids could sleep in the garage only when you have guests or the guests could sleep in the travel trailer.(I understand many people don’t want a travel trailer on the property)

That is of course just one take on it. Feel free to ask me any questions.