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I lived in two different houses. Both were quite small compared to houses in America. They were both two-story, but the rooms themselves were just smaller. Most of the houses I saw also only had small gardens in front, and yes they were generally two-story and pretty close together, though there is always a wall surrounding the entire property.

My friend lived in a fairly large house in Japan, but it was nowhere near the size you would expect for a family with a similar income in the U.S.

I did have another friend who lived out in a rural area and her family had a very large Japanese-style house, but I don't think these are very typical (I'm pretty sure her family was rich)

Here's kind of a picture of the one I lived in. I think it might look bigger than it actually was. I remember when I first got home to America and realizing just how much bigger my own house is.

House