If cities could be more dense, we could pack the same number (or even more) urban-loving people in less space, and there would be more space left over for the rural-lovers elsewhere.
The US doesn't have a free market in housing. There's lots of stupid zoning and covenants.
Yes, some people like suburban sprawl and buy it, but the alternatives are pretty much illegal in most places. See eg http://cityobservatory.org/my_illegal_neighborhood/ (The neighourhood featured there is still too sprawly for my tastes, but already illegally dense.)
Sprawl happens because its a free market, and people buy that stuff (suburban housing).