Even worse is when the smaller homes are closer to the center of the ever-growing urban sprawl, so the land value is through the roof due to location, and only the wealthy can live in them.
There are no starter homes left at starter home prices. You either get a mcmansion that could hold a family of 8 comfortably, or you're stuck in an apartment. There are no modest new homes being built for a family of 3 or 4.