Wants, Needs & Size
House size is a complex emotional topic, that affects more than just the environment: size affects first cost, maintenance costs, heating costs and ease of cleaning. Most everyone has an idea of what size they want their house to be be, both in terms of number of rooms and square footage, but this may not actually be the size you'll use: there is some evidence that a sizable chunk of many homes goes unused--particularly in larger homes. The idea behind the "needs" exercise is to try to determine what rooms you'll likely actually use. This isn't to discourage you from building want you want1, but rather a word of caution: all to often people discover that what they thought they wanted wasn't actually what they wanted. Wants are mostly derived from the limitations of the current space they live in, and its hard to imagine living in a new space until you've lived in it.
The idea here is to start by finding your needs and work from there: at least this way any bonus space you're building is done more consciously, hopefully increasing the likelihood it's used.
T The idea here is to build a house for the way you actually live rather than the way you think you live, or even worse the way someone else thinks you live. The less suitable your current living situation is, the more difficult the exercise, but it is still highly valuable.
The needs exercise: each person records how much time is spent in each room, and preferably even what part of the room and for what activity, ie sleeping, cooking, eating, bathing, reading, socializing, etc . After a week or so, a pattern begins to form, and typically some spaces are used often, and others rarely; spaces are both used for their original purpose, and often for other purposes as well. This pattern of usage points out space that is missing or doesn’t work well, and also helps identify ways in which spaces can have multiple uses. Pay attention to what conflicts arise, and what time is spent outside of the house due to those conflicts or other limitations. Are there barriers to being together? Are there enough spaces for quiet activities? Does one activity interfere with another due to room layout problems?
At the end of the week you have a list of room uses and activities and can translate that into rooms, taking into account activities that can co-exist in one room, and which cannot. You will also need to add to this list infrequent activities such as holiday gatherings and out of town guests and add those to your activity list considering that these activities are the primary candidates for sharing a room with another activity. Keep this list of activities handy, because you'll use it later when sizing the rooms to make sure the room accommodates all the activities proposed for it.
The biggest limitation of this exercise is that since you're looking for another place to live, your current house probably does not meet your needs, and hence you'll likely either have much unused space, or be cramped with constant conflicts over space. In the later case, there is an additional difficulty in that its hard to imagine how you'll use a space until you are actually in it.
The biggest challenge in this exercise is how to handle those infrequent activities like the holiday gathering. There are two ways to look at it: who hasn't been to a holiday dinner where folding tables are placed far beyond the boundaries of the normal eating area and thought it was just fine that way? Or, alternatively, who wouldn't want a dining area big enough to accommodate the entire family? This same thought pattern can be applied not only to other infrequent activities like out of town guests, but exercise rooms, bonus rooms etc to determine whether it makes more sense to share that activity with another room or at least make the design flexible enough that the room can be re-purposed if desired, particularly if you plan on living in the house for a long time.
It's also worth considering future reuse of the building, mostly in terms of asking how likely the building could be re-purposed by some family of the future, although there is much you can in how you build the building to accommodate that (see adaptibility) that this is a minor consideration at this point.
The current trend in the US is for more room than necessary, but this trend maybe beginning to reverse itself. The following are other aspects of size that are worth considering.
Environmental impact and size: In general, the biggest environmental impact of a building is its size, but its not the only factor. Essentially there are three issues here: land use, material use and energy use, and larger houses tend to (but don't always) use more of all three. The issue here isn't really between a 3000SF house and a 1200SF house--if both are equally well done, the smaller house will use less energy. When considering the difference between a 2000SF and a 1500SF house, the difference might not be a big as it seems depending on the shape of the house, size and position of windows etc. Of course, if the same energy saving design goes into both buildings, the smaller one will always be better--but design is always about more than energy, and so apples-apples comparisons of different size buildings almost never happen. Material use is also not only related to size: shape also matters, as does level of detailing, the issue of reclaimed/reused materials etc.
Environmental impact can also be looked at on a per-person basis, and various other ways, so ultimately there is no good objective measure of how "eco" a building really is. As with other sensible house topics, the objective here is to give you the information, and let you make your own decision.
Cost and size: Cost generally goes up with size, but not always directly proportional. Some of the same factors that affect the environmental impact, also affect cost: complexity in particular, although land costs can be significant also.
The idea of "Just the right size"2: A house is just the right size when every attempt to make it smaller results in a serious impact on its usability and simplicity of construction. The idea here is to build only the rooms you actually use, and then make each of them the size they need to be. There is no perfect size house for everyone, and different lifestyles need different amounts and kinds of spaces, although there are clearly common themes that work for most people. The "three bedroom, two and a half bathroom" one size fits all model no longer matches what a family looks like. Being "just the right size" doesn't imply that its the smallest house you can tolerate, but rather than any additional space has been careful considered. In this respect, you can’t know what the right size is unless you know yourself.
Notes
1. admittedly I actually would like to convince you to be careful about excess space, but trying to talk people out of their dreams is generally bad policy, and plus the intent of this site is facts, not policy. Since budget problems already are a size limit for many people, this really only applies to people with large budgets, and if they really want to live in a palace, who am I to say its a bad idea?
2: the idea originated in the "Not so Big House" books. See "resources" on the main design page.