Three years into the downturn, that trend appears to be intensifying, as more builders scramble to make their wares affordable to first-time buyers and compete with preowned homes and discounted foreclosed homes on the market.

Los Angeles-based KB, which builds homes to order, began downsizing some of its floor plans last year.

"That worked for a time, but the market continued to move away from us," said Chief Executive Jeffrey Mezger.

The company initially pared down 3,400-square-foot homes that sold for around $450,000 to 2,400-square-foot homes selling for around $300,000. Now the builder is shrinking homes again. It recently launched a line in foreclosure-ravaged Southern California that start at 1,230 square feet and are priced a little over $200,000.

The trend in smaller homes is a reversal of more than two decades of expanding floorplans, during which median size single-family went from less than 1,600 square feet to more than 2,200 square feet. These homes packed with amenities helped drive up prices even more.

Beyond competing with preowned homes, declining prices have also made it less profitable to build large homes, said Nishu Sood, a Deutsche Bank analyst. "The only way to respond to the lower price environment ... is to make the home smaller," Sood said. "... We're getting back to more the way things were historically, kind of undoing the excesses, not just from a price perspective but home size and [fewer amenities]."

KB Home began to rollout its most recent iteration of smaller homes this summer in Beaumont, Calif. The homes are 1,230 square feet and have three to five bedrooms. Previous KB developments in the area were in the 3,000-square-foot range.

"We really looked at what can the first-time buyer afford based on the median income for those markets and that's kind of how we designed our house to meet that price point that would attract those buyers," said Steve Ruffner, president of KB Home's Southern California Coastal Division.

The company plans to roll out more of these smaller floor plans nationwide next year.

The homes feature open spaces, a great room linking the living room and dining room area that might have previously been walled off, a two-car garage and storage space.

"The square footage isn't the focus, it's really the utility and efficiency and flexibility of the home that is our focus," Ruffner said. "The trend definitely is going to be, I think, getting back to the basics: What people can afford is the type of home they're going to buy."

Homebuyers' tastes, possibly influenced by tighter mortgage lending, are also helping drive the changing trends in new homes.

Big formal entries, high ceilings and lavish light fixtures are also not as high a priority among many buyers these days, said Linda Mamet of John Laing Homes in Irvine, Calif.

Allen Morris, senior vice president of sales and marketing for Warmington Homes, said fewer buyers are opting to upgrade from a standard laminate kitchen countertop to a granite countertop.

The builder also has downgraded the level of amenities and finishes built into its showcase homes, to reflect the base price of homes.

"With move-up buyers, for a long time everybody wanted the biggest house on the biggest lot with the best view and all of the options," Morris said. "What we're doing is we're building homes today that have a lot fewer options."