It is really expensive to build an addition, as you're finding. Few additions look too good- most don't blend in with the house well. Something kind of neutral in the back with siding is probably better than a lot of additions I've seen. It is really expensive to get a good architect and build a good addition.
We're in Arlington and have considered the same type of equation you are. For us, the numbers didn't make sense - for an addition (eg, might spend $200k but only increase the value of the property by $100k, not at all appealing to us) or knocking down the house and building a new house (might spend $300k, but increase the value of the property by a lot more-- but we don't plan to move, and aren't comfortable taking on the debt at this time in our lives.. the increase in property value would just have the effect of increasing our property tax bill ).
We're content enough with the current house. We'll stay here until we burst out of this house, then will consider moving or look at the build-a-dreamhouse option again when we have more money.
Best of luck - it could make sense in some circumstances, for certain. I'd recommend checking estimates with Commonwealth Restorations (obviously located in the Commonwealth of VA but they may do work in CC) . Also recommend Case Construction. Also if you run or walk around the neighborhood, I'd see which builders have signs in front of your favorite house renovations- that is a good way to get ideas and builder references.
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