Greg Welch, owner of Greg Welch Construction, said consumers want smaller homes, like the 1,804-square-foot house he's building in NorthWest Crossing.

Homebuilding made a comeback in Bend last year, led by a trend away from the luxury real estate typical during the bubble and toward scaled-down projects for the price-conscious buyer. The 452 single-family home permits issued by the city in 2012 outpaced the 406 issued in 2010 and 2011 combined, Bend permit records show.

But the homes were considerably smaller than their prerecession counterparts — about 15 percent smaller on average than those permitted in 2007.

Builders pushed the limits on size when Central Oregon home prices soared to record highs during the last decade. But some building companies found renewed success in 2012 by shifting away from the high-end properties that put Bend on the map, eyeing smaller, economical homes instead.

At the same time, an increasing number of Bend residents are looking for extra income by building small, second properties on their lots and renting them out.

In 2007, the average size for a house built by Pahlisch Homes measured 2,388 square feet. Last year, that average had dropped to 1,977 square feet.

But Dan Pahlisch, the company’s vice president of sales and marketing, said the market has changed.

“I think a lot of our views of what we need (in a home) have changed,” Pahlisch said. “I just don’t think people want the square footages they did, or perhaps people aren’t trying do the two years and flip thing, where they own for a couple of years and move into something bigger and better.”

The average home in Bend last year totaled 1,971 square feet, a review of Bend building permits reveals. In 2007, it was 2,295 square feet.

Just 17 percent of permitted homes were 2,500 square feet or more in 2012, down from 31 percent in 2007.

“The market has shifted,” said Greg Welch, owner of Greg Welch Construction. “A lot of people are simplifying, moving out of big estate homes.”

The reasoning is straightforward: People lost their homes, and many had to downsize after the 2008 crash. Building smaller is about meeting demand.

Size and style dominated in the early and mid-2000s, with out-of-state buyers coming in and looking for 4,000-square-foot homes, said Andy High, vice president of government affairs with the Central Oregon Builders Association. That the housing crash would nearly wipe out demand for those types of properties is simple economics.

For Pahlisch Homes, 2012 brought new building activity to numerous stalled subdivisions, like Quail Crossing, off of Southeast 15th Street; Badger Forest near Parrell Road; and McCall Landing, near Northeast 18th Street. Pahlisch took out at least 10 permits in each of those subdivisions, most for homes in the 1,500-to-2,000-square-foot range.

“For a number of years, it was the bigger the better,” Pahlisch said. “But I think we’ve gone back to the grassroots of homeownership, where it’s about building value over a long time.”

Last year’s uptick in single-family home permits came as Bend’s existing-home inventory shrank. The city has just a 2.3-month supply of housing inventory, according to Lynnea Miller, principal broker with Bend Premier Realty. Inventory was close to 10 months in 2009 and 2010.

Sales on homes valued at $250,000 or under is driving almost all the inventory reduction, Miller said. And homes at that price aren’t likely to be much more than 2,000 square feet.

“People right now are recognizing that with those very large homes, you have to pay an awful lot in property taxes, heating bills. It’s a huge cost,” she said. “So people have downsized.”

As a tourist and resort area, Central Oregon will always have some market for high-end buyers, High said. But even some of those who can afford a second property have changed their tastes. If they’re only living in Central Oregon several months a year, a smaller home makes sense.

“I think about 20 percent of our market is second-home buyers,” High said. “But the people coming now, for the most part, they want maybe a single-story home with a small upstairs, that requires less cleaning and maintenance. “I think it’s a trend that we’ll see continue.”