Wanda Urbanska’s dream home is more cottage than castle. Despite childhood yearnings for sprawling digs with a lavish pool, her concern for the planet’s welfare and a practical approach to finances has led her to a radically different fantasy: a home that is small, green and paid for.

Owning a smaller home is a “triple hitter,” says the Harvard graduate and author of The Heart of Simple Living: 7 Paths to a Better Life. “With a smaller home, we can pay off the mortgage quicker, use less furniture and have less space to clean and maintain, heat and cool.” Also, less space effects less consumption—needed more than ever as dwellings have increasingly turned into what Urbanska refers to as suffocating, “sinkholes of stuff, clogging the flow of energy and movement in our lives.”

She predicts, “Once we’ve purged our systems of the excess, the focus will be on creating lives that are dynamic and streamlined, where the carbon cost of a thing is weighed along with its price tag, and where the focus is on usability, rather than ownership.”

The rise of McMansions as part of a runaway “bigger is better” mentality saw the average American house size surge from 983 square feet in 1950 to 2,521 square feet in 2007, reports the National Association of Home Builders (NAHB). Due to the 2008 recession, many owners were left with upside-down mortgages, causing newer homes to be more modest in size. Like the notorious sports utility vehicle (SUV) craze, now faded due to steep gas prices, the McMansion trend is quickly declining.

“Today’s entrylevel buyer seems to prefer a far simpler presentation than what had been popular with their parents,” observes Heather McCune, former editor-in-chief of Professional Builder and Professional Remodeler. “I don’t think it would be out of line to characterize it as an anti-McMansion attitude.” Real estate website Trulia.com recently reported that slightly more than half of Americans say that 1,400 to 2,600 square feet would be their ideal home size. According to the NAHB, nine of 10 builders are planning or constructing smaller homes than in the past. In 2010, the average new home size dropped to 2,377 square feet and by 2015, the average newly built home is predicted to measure just 2,140 square feet. Even in more affluent areas, builders are beginning to construct model homes that are one-third smaller than what they were building just a few years ago.

“‘Small is beautiful’ is back in vogue,” remarks Andrew Gates, a Sotheby’s International Realty real estate broker in Salisbury, Connecticut. “The simplicity aesthetic is more prevalent after what we’ve been through the past few years.”

Savings accrued from the purchase of a more sustainable, lower-impact home allows reasonable investments toward modern, energy-efficient upgrades like bamboo flooring, water conservation and filtration devices and Energy Star appliances. The National Association of Realtors’ 2010 Profile of Home Buyers and Sellers found that nearly 90 percent of buyers considered heating and cooling bills important, and more than 70 percent wanted high-efficiency appliances.

“As advocates of energy efficiency, we have been encouraged by a change in home buyers’ and homeowners’ attitudes toward energy efficiency,” says Kateri Callahan, president of the Alliance to Save Energy, a nonprofit based in Washington, D.C. With increased energy efficiency comes increased home value; a recent study in The Appraisal Journal indicates that the market value of a home increases by $10 to $25 for every dollar saved on annual fuel bills.

Coinciding with smaller single-family living quarters is a boom in multigenerational homes across the country. According to U.S. Census Bureau data, as of 2010, 4.4 million homes held three generations or more under one roof, a 15 percent increase from 3.8 millionplus homes just two years earlier. In multigenerational households, the need for expensive daycare is lessened, while grandparents and adult children can also contribute to household income by paying rent. Urbanska, who resides in North Carolina with her 90-year-old mother and 15-year-old son, says, “I’ve been able to save money on both child and elder care while staying close to Mother in her later years.”

The rapid turn toward both financially and environmentally smarter habits looks like it’s here to stay, concludes Michelle Kaufmann, co-author of the acclaimed Prefab Green and a Sausalito, California, architect of eco-friendly homes. She says she is busier than ever, because these concepts are resonating widely. “It’s sad that it took a complete economic meltdown for people to appreciate smaller homes,” she observes, “but at least something good can come from it.”

Lindsey Blomberg is a freelance writer in Sarasota, FL.