I wonder how empty-nesting attributes to this. My parents have 3 empty (really, repurposed) bedrooms in their house now. But downsizing in their area wouldn’t actually help financially, so they don’t.

Empty-nesting has been a thing for about 2-3 generations. Before that there were often multi-generation homes. But it seems like people didn't really up-size 2-3 generations ago. Many of the great generation were happy to build their 1000sqft Sears house and live there the rest of their lives. The last 1-2 generations seems to be more of a drive for trading up to bigger and better everything. Now we see empty-nesters in 2500sqft houses. I think it's natural to not not want to leave a long-time home, even if it is oversized and only filled on holidays for company or parties. But why do we really need that much space in the first place, seems to be more of the question.

In my case, most elderly relatives own their largest homes ever for when kids visit. So many bedrooms have never had a full time occupant.

Idk if the article says this (paywall), but: Home ownership is basically subsidized in the US. So to take full advantage of that, someone may want to buy the most expensive house they can afford in the place they want to live. If it has extra bedrooms, so be it.