There is a reason that tiny houses are popular today. Many people are building smaller homes to save in construction costs. You may save enough money building a small home to pay for nicer designs and construction details.
According to the U.S. Census Bureau1, the median size of a new single-family home completed in 2019 in the Northeast was 2,364 square feet, compared to 1,450 square feet in 1973. The same source indicates that, in the Northeast, the average contract price for a new single-family home started in 2019 was $156 per square foot. In other words, the typical cost to build the median sized single-family house may cost about $369,000 based on these figures. To build the median sized home in 1973 would reduce costs by about $143,000.
In some places, building codes limit how small a dwelling is acceptable, effectively not allowing some tiny homes.