to move or not to move?

Right now we are busting at the seems of our house. Just the two of us {and 3 dogs}! This weekend we took stock of the "clean sweep" we need to do. It's not pretty!

I admit that I am a bit of a pack-rat and Aaron and I both collect various things. He's got more sports stuff then he'll ever know what to do with and sadly, I've probably got more yarn & fabric then I'll ever know what to do with. But those things alone are not causing us to feel cramped in our house.

We bought right at the peek of the market which certainly wasn't ideal, BUT that's when we got married and we had this little issue of having giant 'my little pony' dogs who made it nearly impossible to rent. We bought what we could afford... a two bedroom, one bath, less than 800 sq. ft. house. It's an old house which means NO storage. We use the second bed room as a combo dog room / storage room. The dinning room is the place we eat and the place I quilt and do school work. The kitchen triples as the place to cook, the laundry room (yay for stackable washer/dryer combos), and the utility room with the fuse box and hot water heater.

We know that when we finally start our family we'll be spilling out into the yard. So we are at a fork in the road. There are some things that this house NEEDS before we would be able to sell it given the market right now (new windows, new doors, new cabinets, bathroom redo, laundry room addition, fence repair). But after we sink all that money into the upgrades, would it make more sense just to make the addition a little bigger and sit tight for now (now being only another 3 years tops)? Or do we do the bare minimum for as cheep as possible and start looking for a bigger place?