I think there are more factors at play than you’re giving credit. For example, Germany has an average cost of 3000-5000 euro per m^3 which translates to ~$320-540/sqft. In the US the average cost of a house is ~$146/sqft in the south, ~$156/sqft in the midwest, ~$220/sqft in the north, and ~$195/sqft in the west. So while the 8x vs 4x comparison is accurate, you’re probably also getting 50% less house in Germany.
What do you mean by small and I think context of where you live matters.
Around me there are an abundance of 0.75k-1.5k sqft homes, typically they are older (1940-1980), and they are between $180-250k. They aren’t in high demand because they are older, they may need some TLC, they have old styles, they are 45 min - 1 hour drive from the big city, and they may not be as big as people want.
I have coworkers who lament not being able to buy a house, but when you talk to them they are looking at 2500+ sqft, less than 10 years old, 20 min from downtown, but $425k.
EDIT: After typing this I opened Zillow and within 30 seconds found a house across town that’s 980 sqft, $115k, 1950’s, but you’re gonna have a 45 minute (minimum) commute every day unless you leave for work at 5 am.
EDIT 2: Oh and 0.34 acres with no HOA