No, we aren't. Though, they are certainly not efficient, space wise, and we're also not really treating families as anything more than just individuals, too.
My home is only about 240sqft. Could live on a thousand square foot lot of I had to, but I don't want to.
Sure, cities are fine for some people, and anyone that wants to can live in one, but I don't think that's good for humanity, long term.