Real estate demand shifting to smaller houses

The challenge for builders these days is making less real estate seem like more -- less square footage for less cash, while retaining a feeling of spaciousness.

Builder magazine recently spotlighted 10 communities where making do with less -- less than 2,000 square feet, to be exact -- is synonymous with builder's success. The communities range from Raleigh, North Carolina, to California's Central Valley. Some builders struggled through the recession while others took advantage of depressed prices to stake a claim.

Many appear quite innovative, bridging the needs of first-time home buyers with those of down-sizers. A few builders, however, have a more curious idea of what "smaller" means. The sales manager for Old Orchard Woods, in the Chicago suburbs, for instance, brags that some buyers wanted more than the one-bedroom homes the complex offered.