I get that - and my thought is that the whole concept of owning a big house is ex post facto rationalization, not a root issue. If cities were safer, transportation better, and family infrastructure competent, we'd see a dramatic move back into cities - a smaller space be damned.

And we do see this in some places, where buying a medium-sized flat in a nice neighborhood close to good schools is as desirable as a big house with a big lawn in a nice area.

If you look at suburban developments all around the country, you'll also notice an explosion of smaller houses and townhouses - places that are in many cases no larger than apartments in the city, just in upright standing form. Space is a detail to most of the population, not a core factor.

It's not always space. Just the idea of owning vs. renting.

For example, in Toronto the real estate prices are sky high in the city (e.g. I've heard of just a single floor of some of those large houses in The Annex going for upwards of $800k). There are a lot of condos being built (and already built), but they are all aimed at single people or childless couples, not necessarily at families. Two or three bedroom condos are few and far between, meaning that they aren't exactly cheap.

For purposes of this argument no one gives a damn about Toronto. It's another of the edge cases where attractiveness of downtown of a major city outweighs "normal" North American real estate factors.

Take a look where the most expensive houses in Hamilton or St. Catharines or Kitchener are and where the "bad" parts of town are.