Bigger homes always sell for alot less per sq ft because there are alot of fixed costs that dont dramatically change with size like lot sizes and permitting. Also each house only has one kitchen, one HVAC system, one electrical system, one roof etc. these are the most expensive parts of a house. To see if the bigger houses have dropped by as much as you think you really need to compare with price/sq ft at the peak and not just apply a relatively arbitrary figure to homes of all sizes.
