Yes, there is room for a 4" phone
I bet that Apple will release a 4" model next year. Currently the 5s serves the purpose.
Here is my situation, and I bet a lot of people are in the same boat. I had a 5, and wanted to update. I did feel that I wanted a larger screen than the 5, but not sure about trade offs.
While I didn't think the 6+ would fit my lifestyle, I kept my mind open and tried it in the store. At home I made a cardboard cut out of both the 6 and 6+. After much consideration, I decided that the 6+ was not a device I would enjoy carrying and using for most of the things I want to do on a phone. Sure, the screen is big, but not enough to replace my iPad. Even though I never thought about it, I use my phone one handed more than half the time. I couldn't with the 6+. I can't sit down with the 6+ in my pocket which is too much of a hassle.
On the other hand, the 6 screen is a significant update from the 5 in term of size. Articles and books pages fit lot better , and I can read with one hand.
I do however feel that the 6 is a bit unwieldy compared to the 5, but the trade off is worth it for me.
But I am sure there are millions out there who would prefer a 6 in a 4" screen. I don't see why Apple would not make them next year. Would it be the 6 Mini or 6-?