Take a look at the alcove in which Cliff Palace is built. The rock you see is Cliffhouse Sandstone, geologically deposited during the Cretaceous Period some 78 million years ago. Since sandstone is a very porous material, moisture seeps right down through it. Beneath the layer of sandstone, however, is a layer of shale through which the moisture cannot penetrate. In the winter months, when the moisture freezes and expands, chunks of sandstone are cracked and loosened. Later these pieces collapse, forming alcoves such as the one here.
The majority of alcoves within Mesa Verde are small crevices or ledges able to accommodate only a few small rooms. Very few are large enough to house a dwelling the size of Cliff Palace.