Ciara Young calls it the story of the ever-shrinking house.

Young is a real estate attorney who bought her 3,000-square-foot home in a Penn Township development called Sweetbriar Creek nearly three years ago. She thought she knew what her neighborhood was going to look like once it was built out.

"Everyone was building 2,200-to-2,500-square-foot homes with upgrades," she said. In fact, the township's conditional-use agreement with builder Keystone Custom homes required all homes to be 2,000 square feet or bigger.

But then, "they started building a lot of smaller houses, with no upgrades," Young said. Young went to refinance and found she couldn't — the "comparables" in the neighborhood had, in effect, reduced the value of her home.

"People lost equity," she said of her neighbors. "The people in our neighborhood are now shackled to our homes."

A Keystone representative did not return several phone calls seeking comment. But other local builders point out that in this economy, smaller homes are exactly what buyers want.

According to Census figures, the average size of a new single-family house shrank from 2,529 square feet in 2008 to 2,422 in 2009 in the northeastern United States. And with the decrease in size comes a decrease in price: According to figures provided by the Lancaster County Association of Realtors, the number of houses sold at $300,000 and above has plummeted here in recent years. In 2007, 12 percent of all homes sold in the county were priced at $300,000 and above; in 2009, just 8.8 percent were.

That figure, in the first quarter of 2010, was 8.6 percent.

Realtors as well as builders acknowledge that homebuyers are simply in a more frugal mood. Mike Gumpper, a professor of economics at Millersville University, said that's obviously due to the economy — but other factors could be at play, too.

"As baby boomers who benefited from the strong economy of the 1990s and bought large, luxury homes enter retirement and become empty nesters, they may be looking to downsize," Gumpper said.

Maybe their tastes and needs have changed; maybe the recession has hammered their retirement portfolio. But the result is a "decrease [in] demand for large homes, resulting in excess supply and downward pressure on prices as the market readjusts."

A telling Parade
The recent Parade of Homes tells the tale.

In 2007, the local Parade featured just two single-family homes in Lancaster County priced below $300,000; the lowest-priced entry, a three-bedroom, 2 1/2-bath home in Penn Township, cost $271,700.

This year there were five single-family homes in Lancaster County featured in the parade at under $300,000. The lowest-priced, in the Lancaster Township development of Conestoga Reserve, cost $249,900.

"That $300,000 and under, that's the range buyers want right now," said Scott Provanzo, of Heartland Builders. "A lot of houses in the $225,000 to $270,000 range are a tremendous value right now."

Whether it's new construction or existing homes, "price is the main factor driving sales," Provanzo said.

Just three years ago, it seemed buyers couldn't get enough high-end housing.

Between 2004 and 2007, the percentage of homes sold for $300,000 or more climbed from 7.1 percent of all home sales to 12 percent, from 452 homes in 2004 to 711 in 2007.

Indeed, the high-end market seems to have peaked in July 2007, when the median price for all homes sold in the county reached $184,900, the highest single-month price ever recorded by the Lancaster County Association of Realtors. That month, 27 homes sold priced at $400,000 or more.

Then market conditions changed.

The median price of homes here fell, as did the number. In all of 2008, just 476 homes were sold at $300,000 and above; but because so few homes overall sold that year, this figure still represented 10.5 percent of all homes sold.

In 2009, the number fell to 395 homes; in the first quarter of last year, an anemic 55 homes — 7.7 percent of all sold — topped $300,000.

But by year end, the figure had risen to 8.8 percent. Some say the market for higher-end homes could be poised for a resurgence.

"It's stronger than it was," said Randy Hess, who owns Hess Homebuilders and developer Oak Hill Partners. "But some of those who bought at the peak, they're struggling."

That includes builders, said Hess, who bought land during the boom with the goal of building large, pricey houses — and now find the market for such homes has softened.

If they can build smaller houses — and are willing to make a deal — builders can still find a market.

"You get more for your money with an existing house," said Serena V. Reidel, an agent with Long & Foster Real Estate. "But now, with prices being so low, and so many incentives out there — free gas for a year, no mortgage payment for a year" — those in the market for an older home might consider a new one, if prices are comparable.

Still, "if you bought two years ago, you should still be able to get what you paid for it," Reidel said. "But we don't have that 5 percent increase every year."

Prices headed south?
Recent figures suggest home prices could fall even further. With the expiration of the homebuyers' tax credit, pending home sales plummeted here in May — down 39.3 percent to their lowest May level in at least 10 years.

The Philadelphia Inquirer last month reported that, nationwide, home sales "have been shifting toward lower-price segments of the market — less than $350,000" — since 2006. Michael Feder, president and chief executive officer of Radar Logic Inc., which tracks real estate values, told the newspaper that, on average, the sale of homes priced under $350,000 has increased 12 percent year-over-year since January 2009, while homes priced from $350,000 to $900,000 have fallen 8 percent.

This, he said, "reflects a decline in home prices in all price segments, as well as a decline in demand for expensive homes due to the economic downturn and the paucity of housing credit, particularly jumbo loans."

Dr. Antonio Callari, professor of economics at Franklin & Marshall College and director of the F&M Local Economy Center, put it more succinctly: "The mid-to-upper-middle classes are learning to settle for less."

With the end of the housing boom, Callari said, "the McMansion phenomenon ... will pass from the frame of the 'normal' into the frame of conspicuous."

Gumpper, the Millersville economist, isn't so sure.

"If the economy improves, demand will rise again, and the prices of existing large homes will rise, and builders will increase their quantity supplied over recent levels," he said.

But it could take a long time.

"A change in tastes and preferences away from larger homes, unrelated to economic conditions, could impact this segment of the housing market for many years to come," he said.