A friend and I once talked about the Fire nation strategy to decimate the other nations and how it changed the Southern water tribe. It's a big part of the plot that the Fire nation captured (almost) all of the water benders in the Southern Water tribe and took them away. Because they now have no benders to build/fortify their villages, the Southern Water tribe were relatively unable to resist Fire nation attacks. One of the downfalls of the Air nomads is that they had large, well-known temples that they traveled amongst. Since the Air nomad's bending doesn't allow them a physical building capability, they relied upon what they could build manually. The Fire nation was likely trying to do the same thing to the other tribes and force them to only slowly build manually. So when all of the water benders of the Southern tribe were taken, it may have made more sense to split up and have small encampments to hide from the Fire nation ships rather than have large cities where they could be easily destroyed.