Would you consider it irresponsible for someone to buy a $400k house with 20% down to be irresponsible? I wouldn't. But would you consider it irresponsible for someone to buy a $400k house with 5% down when there were similarly sized, lower priced houses that would have allowed him to put 20% and avoid PMI?
depends on a number of factors-
what makes the more costly home a better choice for them (school districts, lower property taxes, reduced commute, better upkeep so lower initial repairs/maintenance costs...),
what the real estate market is like in the area where pmi necessary purchase would be required. is it reasonable that housing values increase such that waiting a year or two would make the buyer priced out of the market while buying now would enable them within a few years to gain equity such that they can drop pmi,
interest rates-right now with record low home loan rates, buying in even with pmi could be MUCH less costly than the difference in interest waiting to save that extra 15% might result in.
sure they could buy the lower priced house but i don't feel someone should buy any house they don't want just to be buying a house.
Is the average 24 year old really going to put down 20% on something and then if so, what? Is some $100k starter home really going to meet their needs 20 years from now? Heck, screw 20 years -- how about in just 5 years when they might be married and pop out a few kids?
our starter home was (adjusted for inflation and wages) in that ballpark and we were in it for 7 years. it worked fine in our 20's, into our early 30's, worked fine when the kids came along and would have continued to be fine but we WANTED a different home and could afford it so we CHOSE to 'move up'. there were many in the neighborhood who had bought as singletons, raised their kids in them and saw no need to upgrade.
i honestly don't know many 24 year olds looking to buy. i was late 20's when we bought as were most of my friends. but i also don't know many late 20 somethings looking to have kids so i don't see that as a huge factor these days. seems most of my oldest's (27) peers are rather scared off home ownership probably b/c of what they saw/experienced personally within their families during the last recession (allot saw their parents lose homes, saw how the value of a house can drop by hundreds of thousands overnight). on having kids being a factor-they like most their age are putting off having kids. the historic low birth rates for the 20/early to mid 30 somethings isn't just a fluke-it's by very vocal choice on their part.
p.s. we bought our first house w/5% down. within a few years it appreciated such we were able to eliminate p.m.i. but we wouldn't have been able to afford to buy if we had waited. the entire cost of the p.m.i. was a wash due to buying during a buyer's market at an interest rate we could afford including the p.m.i.