Yes, the town has the feel of one with a few thousand inhabitants, and none of the insularity of a villiage where everyone`s related.

The sparseness of the population of Tolkien`s world as opposed to our own, I suppose is best explained by the malice of Sauron, working over two millennia, which didn`t allow populations to recover from catastrophe the way they normally would, and which they certainly did in the first millenium of the Third Age. In Eriador at least, the presence of orcs, wolves trolls and barrow-wights probably prevented anyone from being able to spread out into the wild, or even being able to live safely outside those few settlements the rangers were able to guard, in Eastern Eriador at least - although there they had to deal with the worsening of the climate there as well.

Even so, it`s only sparse near certain dangers. Even in Eriador, we`re told that there were more hobbit "outsiders" than the their relativesin the shire had any idea of. The desolation of the dragon recovers remarkably quickly once Smaug is gone, and Wilderland across the river was already recovering, with the outlying homesteads of the new settlers that were the object of the goblin raid, even before the Battle of the Five Armies gave Beorn the opportunity to organise them into a tribe capable of keeping the mountains open.

The only totally uninhabited areas, I think, are the borderlands with Sauron`s power east of the Anduin, and that is what I would expect. In those lands neither side could afford to allow the other to establish any settlements, and the modicum of safety for families and farms simply couldn`t exist.

Men seem to have been reluctant to settle near where elves lived, or had lived, whether it`s Eregion in the third age, or the lands beyond the Baranduin in the first part of the second. That does seem strange to me. Surely some men at least would have conquered the fear. The Lord of the Nazgul seems to have thought it quite possible that the Shire of the hobbits was within the borders of Lothlorien, although he perhaps knew very little about hobbits.

Another unrelated question. Why didn`t the Lord of the Nazgul know there were hobbits in Eriador? He had ruled in Angmar long ago, but hobbits were already in the shire long before he left, and we know he still remembered Bree, where some of them had always dwelt; also, some hobbits at least fought against him. He can`t have been completely oblivious to their existance; he must have known that they had settled all of southern Arthedain, and he ought to have thought it worth a try, instead of spending so many months searching in Wilderland before he turned west.