As long as it is useful, I keep upgrading the house, roughly in these steps:
Start: simple bedroom, bathroom and general room (kitchen+dining room+living room in one). House size is usually 10x10 or similiar
step1: add one skill room, usually gym
step2: make a child, build him bedroom with private bathroom; expanded with aging and later marriage. Similiar step is made anew later with grandchildren.
step3: expanding existing rooms to remove pathing issues.
At this point I usually move from starting lot to 60x60 or bigger and buildint the house with wider halls to make pathing with multiple sims easier
step4: adding another room, usually library with music instruments and such
step5: complete back yard beautification, usually building a lake with lot of trees and bushes. fence added. If I built a pool before, house is expanded in height and pool is moved to the roof.
later, if needed, I add "explosive room" (cointains the alchemy pot, gemcutting machine, and/or inventor's table), entertainment room(with pool, darts, table football and such group activities); garage (usually underground, but rarely needed as chopper is easily kept in sim's backpack and fast enough) or laundry room. If I use a sim to travel, nectar cellar and "vault of antiquities" is built.
Decorations are mostly sim-done paintings with a statue here and there.
Due to my practic approach, the house rarely exceeds 500.000 worth. After that the money just accumulate as sims continue living normal life, though I choose jobs/professions that aren't much money makers at that point to try them out.
