Home ownership rates are higher than they were in 1975 though and the number of people living in single family homes is close to what it was in 1975 (a little lower but the same as it was in 1955).
So the vast majority of people have more space for entertaining than in 1975.
You don’t need a big house to throw a party. After divorce I decided to relive my teenage years and thrown many parties in a 40m2 apartment. You can easily fit 30 or more people in.
Were houses that much bigger in the 1970s, though? Families definitely were bigger, so there were more people per square meter. I think overall, it's a sociological change, not a financial one. People are just less into hosting parties; too much hassle of cleaning up & preparing food, too many online distractions, etc.