I don't disagree with the recent trend that graph represents, but it would be better if it were based on dollars per square foot, which more accurately represents what we're getting when we buy a house. The average home was 1525 sf in 1975 and 2225 sf in 2005.
http://www.census.gov/const/C25Ann/s...medavgsqft.pdf
So on average we're getting 25% more house in 2005 than 1975, but we're pretending like we're paying for the same size house from 1975. I imagine they were slightly smaller the older you get to a certain point.