We downsized from 1907 to 1144 a bit over a year ago and are still pretty stoked about our place, aside from the slightly cramped kitchen. We could have at least one kid and still feel pretty uncrowded, but we both have home offices so two would probably be a challenge.
A good friend of mine is downsizing too, from about 1400 to 1000. He's single, with just a dog and a girlfriend who stays over sometimes, so it's still plenty of room, but another friend of ours insisted that 1000SF wasn't even a house at all. I said, do you know the average home size from 1950? ;)
Same friend, ironically, bitched privately when his wife pushed him into "upgrading" from their perfectly good, newish, beautiful ~1500sf home to a much bigger, blander, more expensive one. He hates his government job and wants out; finding sufficient income to support their lifestyle is the primary obstacle. We Americans are nothing if not conflicted.