I do not know much about homeownership in Germany. However, in America owning a home is synonymous with obtaining the "American Dream" and home ownership is great. The problem is that the cost of housing has increased a lot more then incomes have. Many people take out mortgages that they can barely afford and if they get layed off or have a major medical issue they can no longer keep up with the payments and lose their house. Also in many small communities the entire economy is based on one thing like a manufacturing plant. If that plant closes the entire towns economy collapses and the houses become worthless. This is a problem you are seeing in many towns across the country.
As far as why people are so eager to live in big cities from my prospective most high paying jobs are located in major cities. The common route people take is to live and work in the city when they are in their 20s and then settle down and move to a surrounding suburb and start a family in their late 20s early 30s. Of course I am only talking about one subset of the population.
RE: The smallest NYC apartment I have ever seen.