Semi-detached house (130 sqm) in South Bavaria financing

The price unfortunately already ... ...

That's how it is. At some point, it's enough. You shouldn't compete with people who can pay for the house out of their petty cash - you always come off worse in that case.

It's really crazy how much you have to slave away and what a complete disaster it is for a normal family. I know people (both teachers with 7.5k household equity) who bought 1200 sqm of land with a renovated house near Hof (1 hour from NBG) for 180k. They pay it off chill in 5 years and live like a king.

I just looked at your expenses again. Quite a few things are missing and much will no longer be enough when the children get older. Clothing 100 euros for 4 people? That won't work anymore. Studies, schools, etc. will also cost a lot of money. Insurances are missing as well.

700 euros for food and hygiene is extremely little.

... those who can pay for the house out of petty cash - they always get the short end of the stick

People who could pay 1.2 million euros out of petty cash will surely look for something else :) Everyone certainly has to decide their personal pain threshold for themselves. Overall, I find the price quite daring in relation to income. Especially since there are always expenses - especially with 2 children and regardless of the house. Sure, it is said that you get something in return for the money, namely the house. No idea if one should enter the purchase with the thought of possibly being able to sell it again at break-even if things get (too) tight.

People who can pay 1.2 million euros out of petty cash are surely looking for something else

No, they buy it to rent it out for 1500-2500 euros..

People who can pay 1.2 million euros out of petty cash are surely looking for something else :)

Not necessarily, they compete with people who easily pay 3 million. And even in that range, plots and houses are scarce and get inherited.
A school friend received a plot directly on/above the Isar from her grandmother as a gift for the birth of her first child. She still "had it lying around." From her grandparents. It was considered unbuildable. The grandmother received offers every month that would have easily brought her seven-figure sums.