It's because the density of population is about that of a big city. I would guess that demand is enormous, so if microeconomics works in that place...
Btw, does anybody know how much taxes does TA usually pay in Penn State? about 15%?
From my perspective there isn't such a place off-campus. I would guess that grad students (assuming they are there primarily for research:) ) tend to go farther (2-3km) from the noisy center (especially from its south part). Since the town is pretty small, any concentration from my pov is unlikely. Anyway, I don't live in the area, so please take with a grain of salt. Let's wait for somebody more experienced to comment.