In my particular case I was starting with the assumption that the single family home remains zoned for single family, but elsewhere in the economic region there

In my particular case I was starting with the assumption that the single family home remains zoned for single family, but elsewhere in the economic region theres a huge building boom relieving the region of housing scarcity. That said, you are absolutely correct. If building large multifamily dwellings were cheaper & always viable, you would see the cost of a single family home increase to reflect the profitability of doing so (until it is not as profitable, at which point single family homes would start decreasing)