What is wrong with people or are we all priced out?

This Kirkland WA home went pending in 6 days. Current selling price is $2.5m, it was last sold in 3/2021 for $1.9m (seems like a bidding price of $300k over list price of $1.6m). Is $500k increase in price during 3 years justified in current environment? Some folks have made lot of money in the stock market but they are willing to just blow the money blindfolded. https://redf.in/cSHwlm

12722 NE 80th Ln, Kirkland, WA 98033 - 5 beds/4 baths

Redfin