Your usual BS about this issue. Neighbourhoods with good PT accessibility and some mixed-use characteristics are usually more expensive than the average Israeli suburb. For example, a new apartment in central Rehovot's non religious neighbourhoods is more expensive than a comparable apartment in Rehovot Haholandit. A new apartment in Rishon's old center will be more expensive than a comparable apartment in West Rishon. Your usual flaw in this issue is that most apartments in old city centers in Israel are small and in old buildings- so by nature they are less expensive than apartments in newer suburbs. But in general, prices prove that Israelis prefer to live there. They just move to the suburbs because real estate is cheaper there and new apartments are more abundant than in older districts.Its not a matter of what planners view as "modern", nowadays, urban planenrs are all about "sustainability" and all that other stuff you refer to.
Its a matter of what people want and actually need.
Israelis (especially over 30 and those with families, don't want to live in places like downtown Tel Aviv.
Nor do they want to use public transport.
They want a quiet green neighborhood where they can grow their children and live comfortable lives, while driving to work.
Only young people want to live in trendy mixed use neighborhoods and there are only so many of those.
So they choose places like Modiin, West Rishon, Rehovot Hollandit (a similar big neihgborhood built in Rehovot's west, which is basically the same thing).
Those who can afford a more luxury place, are choosing similar neighborhoods in Tel Aviv's north.
People are of course suffering from traffic jams and long commute rides to work in their cars, but they don't necessarily connect it with their lifestyle.
You are forgetting one more thing.
Israelis (unlike most westerners) have compartively large families with more kids in average.
Bigger families mean, you need to buy a bigger apartment, so you will always choose a bigger apartment further away from a center, because its more economical.
At the same time you have a major boost in economic development, meaning its not really that big a deal to purchase a car (or even two).