This should not come as a suprise to many people, but builders are not only cutting back on home production, but size as well. I saw this article earlier this week from
Alllan Lengel in the Washington Post. Read on:

Home builders are cutting back on square footage and offering fewer amenities to keep the costs down.

“We are dealing with realities of the market. Prices have come down somewhat, and some houses are smaller,” says Don Knutson, senior regional president for the mid-Atlantic division of Beazer Homes. “I think square-footage reduction has been about 5 percent between 2007 and 2008.”

A 2007 national survey conducted by the National Association of Home Builders found that 42 percent preferred a bigger house with fewer amenities, compared with 58 percent who said they would prefer a smaller house with “high-quality products and amenities.”

That represented a change from 2000, when 51 percent wanted a bigger home with fewer amenities.

“I would say generally people are realizing bigger is not always better if they can get a smaller home that is affordable,” says Knutson.