I see a lot of owners are emotionally disposed to hold on to their home as a renter but it's normally not the best use of your capital

I don't think I can go any deeper than this.  

My advice would be, always look at your numbers first and foremost; try not to get emotionally tied up in any property if you're investing in it.

You might put more value in financial and your wife is thinking emotionally for the happiness of the family etc.In future years on an ARM if you see that rates are rising past the threshold of the ARM then you might want to refinance for a long term fixed rate at that time if you want to keep the property long term.

If the seller is offended then that's their fault for getting emotional in a business transaction.

I am emotionally involved in my current house because of my neighbors.

Then they do a quick conversion to condos in two years and raises the property value.Such buyers are most likely buying on emotions because they are purely looking for a nice home to live (not cash flow), possibly buying in that location because of proximity to family or about to start a family, etc; so they will pay top dollar.  

Or is there a deeper mindset that has no desire for the additional "baggage" of owning a home? 

Then join a local REI group and begin using this formula to overcome your fear of the unknown....Definite Goal/Plans + Faith + Emotion + Action  = All Human AccomplishmentFaith = Knowing you can accomplish your goal / Self ConfidenceEmotion = Feeling you can accomplish your goal / objectiveIf you feel that you are deficient in any element, focus on working on that until you feel you're ready to take action.I wish you the best.

Brandt is correct, there is no place in business for emotions, leave your heart at home where it belongs.