In particular, I don't think we see a clean line between acceptable and unacceptable neighborhoods. People don't just seek out acceptable neighborhoods free of bad influences, but bid up ever more exclusive neighborhoods, sometimes in the name of good schools and sometimes not. People take on a lot of debt not just to get into acceptable schools, but to get into these exclusive neighborhoods.

You're right that I oversimplified things in this regard. Besides the minimum acceptable neighborhood quality, there are also many expensive status games people play that they could in principle cut back on without any negative consequences for their kids. On the other hand, the difficult question is how much you can really cut back on status games without jeopardizing your social status in ways that could damage your career and make your life generally unpleasant. (It's a difficult topic, but it seems to me like it's hard to escape the effect where higher income comes with the requirements of more intense and expensive status signaling, thus significantly reducing the increase in one's truly discretionary spending power.) On the whole, I'm not quite sure what to think about all this.

On the other hand, I think people are much less stressed than you describe, largely because they are irrationally optimistic about debt, employment stability, and real estate as an investment.

Could be. Except for your closest friends who will presumably speak their mind to you, it's hard to figure out what people really think behind the socially expected facade of radiating success and optimism. I strongly suspect that the events of recent years have shaken a great many people out of their optimism, though.