I'd argue that people live in small apartments because they like living centrally and dislike long commutes more than Americans. Certainly in the part of Europe where I live, a SFH in a not very popular suburbs with a long commute is a lot cheaper than buying a nice apartment down town.

I'd argue that also has a lot to do with what's available. If you go to a restaurant and they don't offer a salad, you can't get a salad unless you go to a different restaurant/region. And also the quality of it. If the burgers at the restaurant are better than the salads, why would you pick a salad. Unfortunately, city living comes with a lot of downsides (as well as upsides) but those downsides are less well managed in the US, making it culturally a different decision to live in a city vs a SFH.

Americans have been sold a story that a SFH with a yard is what it means to be successful so that's what they want. Lawns are a luxury good like BMWs, and who am I to say people shouldn't be allowed to buy what they want with their money.

The various rules and regulations and culture also come into play here as well. City living in the EU is better living than city living in the US, making that even more desirable.