Well, also here most people - if not everybody - would like to live in his own house. But due to building regulations, land prices and other factors, it is more expensive to achive that. You can expect the cost for a simple new small house, with almost next to no garden space around it, to about 350.000 Euro upwards. That is simply too much for a family with a average income.
To the big cities: its true that the well paid jobs are mostly there. However, the majority of people who move to the cities have no chance in hell to ever get one of those well paid jobs. They have low paid jobs, for almost the same pay as they get in smaller cities. And yet they have to cope with the higher price level. That doesn't really make sense.
RE: The smallest NYC apartment I have ever seen.