The folks at the Wall Street Journal (subscription may be required) are talking about the trend towards downsizing. Homebuilders like KB and Toll Brothers have nationwide portfolios and have obviously been dramatically affected by regional drops in home sales across many parts of the country.
During the boom period, these homebuilders were drawn to building high-margin McMansions, large template homes that provided a lot of square footage on the inside but were very similar to others in the neighborhood.
Because many buyers in other regions are reluctant to make "big bets" on real estate (i.e. tie up a large chunk of their net worth in one investment vehicle --- even if they're living in it), these builders have started building McCottages again, smaller template homes that are more affordable.
Eichler would be proud.
Even so, there's another factor that's fueling this trend: the conforming rate. With the evaporation of the secondary market for jumbo loans, mortgages over $417,000, the money used to fund them has become expensive and that cost is passed directly to the consumer.
That difference could be a whole 1% on the loan or more, so Pulte, from the article says that "it expects its average selling price for the third quarter of this year to be $331,000, down from $335,000." Has this decrease in size happened before? You betcha: the early 80's, early 90's and today. But between, the sizes increased all over again.