I suspect that helicopter parenting is a much larger contributor than physical isolation. We have had sparse suburbs in the US since at least the 1950s, and generations of kids grew up in that environment and did just fine.
Perfect summer night and there is not a person to be seen. They felt like they were walking around in some kind of zombie horror movie that all the people had vanished.
It feels as though people slowly learned that they could get away with not introducing themselves to their neighbors, invite them over for dinner, and other activities that were once assumed.