The American dream is shrinking as economic and social shifts prompt interest in smaller houses.

"We're trending toward smaller homes," said Gopal Ahluwalia, director of research for the National Association of Home Builders. He said growth in the average size of new single-family homes, which went from 1,750 square feet in 1978 to 2,479 in 2007, is starting to reverse.

His analysis of Census data showed that homes started in the third quarter of 2008 averaged 2,438 square feet, down from 2,629 square feet in the second quarter. He said there have been slight dips before, but the latest drop was much steeper and is likely to hold even after the economy recovers.

In a survey of builders this month, his group found that 89 percent are building or planning smaller homes. Kermit Baker, chief economist of the American Institute of Architects, said the shift was obvious even before the economic downturn with high-end buyers.

In a survey in April 2008, the AIA found twice as many architects reporting a size decline rather than an increase.

Sales figures confirm the trend. Houses priced under $150,000 were 41 percent of existing sales in November 2008, compared with 36 percent in November 2007, said Lawrence Yun of the National Association of Realtors.

Yun said that when a two-income family suffers a job layoff, "That forces them to downsize." Also, he said, tighter credit has made it harder to get "jumbo" loans for big homes.

"Affordability is a major problem," Ahluwalia said, and smaller usually means cheaper.

Baker said there is less incentive to buy a bigger, more expensive home as the economy weakens, home prices fall and energy costs remain a concern. He said people are less likely to see a home as a good investment.

"People don't want to be wasteful," said J.D. Callander of Weichert Realtors. She said they are concerned about utility costs and cleaning requirements.

Clients used to like the status of a big home, she said, but, "those days are gone."