People have too much stuff. I submit the following as proof.
The white house on the right, the tiny one, is where my grandparents used to live. The house on the left is indicative of what has happened to all the other tiny houses in the area. The two door garage only looks like it's as big as my grandparents house, it's probably only almost as big.
I'll say it again, people have too much stuff. I will openly admit that for a number of families my grandparent's house would be a little uncomfortable. I'd recommend a house of my parent's size for 3+ children any day. For reference, here is said house.
Now, despite my mother's continued complaints about room for her books/art, her desire for a larger kitchen, and my dad's passive tolerance of his notably cramped office this house is quite nicely sized for a family such as ours. There were minor inconveniences to be sure, but there are minor inconveniences no matter what house you have.
There are situations where a large house is useful. Three generation families can definitely use large houses, as could a family with a sizable number of children. I'm not naive to the endless possibilities where such houses are not only justified but arguably necessary for comfortable living. However, even taking into consideration such situations there still should not be such demand for mansion-like houses.
From this, I can only conclude people have too much stuff. Right now I'm living in an apartment, and I have too much stuff. There is lots of stuff I have that I don't use, lots of stuff I used in the past but probably won't again, and there's room for more stuff that won't be necessary to my continued existence or happiness.
In short, consider your stuff. If you need a huge house for it all, you probably have too much of it.