When using plural possessives, do you make the noun afterwards plural?

Question

For example:

Many families own pets which live in their homes.

or

Many families own pets which live in their home.

Answer 1

Since the homes belong to several families, you'll need to use the plural form.

Answer 2

To make the sentence have a plural possessive noun, you would need to say,
"Many families'pets live in their homes."

Then, families' is the plural possessive.