I used to work in a 5-storey office building in Sunnyvale, CA (special permission required to build it). I could look out the window and see 10 miles in every direction. It was a vast sea of aging 60s bungalows. Also the most expensive place to live in the US. All my coworkers commuted for hours every day from the distant suburbs.
You ask what we should be building, and where? How about replacing old single-family homes in the Bay Area or Los Angeles with high-rises, or at least mid-rises...or at the very least town houses or something!