I understand your trade-offs and while I can't answer if you're "right" or not, we made the same decision as you.
Also in a very HCOL area, and I was renting a 2BR apt miserably ($1700/month, but fair market would have been $2000; I'd been there 5 years). We did think about downsizing to a 1BR, but rents for those were increasing to $1500 and it wouldn't accommodate our future children.
So we bit the bullet and bought a fixer-upper 4BR 1300 sq ft house in the same neighbourhood to accommodate our planned family; $2700/month. After the tax break, it's about the same payment as a fair market 2BR apartment. Of course the costs are higher for utilities and much higher for renovations, but we have also hit a big upswing on property pricing, which we plan to cash out of in the medium term.
We have a much better (for us) quality of life in the house. One way or another, most of us have to pay for housing. Effectively we had two choices - a big rent payment or a big mortgage payment, so we picked the mortgage. I think the choice depends on life factors as much as anything - ie we have stable, but location-specific jobs. There's no option to "buy less house" - 1300sq ft is modest anyway.
So yes, in your shoes I would have (and did) make the same call, FWIW.