I suppose we need to get ready to see more point-of-use heaters. The method does have it's advantages.
In "traditional" construction, all the things that used hot water were placed close to each other, and the heater was nearby as well. For example, in a recent building I worked on, the kitchen counter was on the opposite side of the bathroom wall, with the heater placed in the basement directly beneath.
Yet, today homes are not laid out that way. Bedrooms are scattered about, each with it's own bath. The kitchen is often pretty distant from the garage - a common place for the heater. Yesterday's job was in such a home, where the kitchen was the room farthest from the garage.
In such designs, the small size of these heaters, the easier piping, and the lack of delay waiting for the hot water to reach the faucet make them attractive options.
I would not be a bit surprised if someone starts selling "water heater cable" ... a relative of Romex, with 6-#8's and 3-#12's in it. That, naturally, will lead to countless discussions here about de-rating issues