How has the neighborhood changed? Why does it matter to the story that his surroundings are no longer the way they used to be?

Here's
Miller's description of Willy's house. It may as well be a depiction of Willy himself:

Before us is the Salesmans house. We are aware of
towering, angular shapes behind it, surrounding it on all sides. Only the blue light of the sky
falls upon the house and forestage; the surrounding area shows an angry glow of orange. As more
light appears, we see a solid vault of apartment houses around the small, fragile-seeming
home.

Like the house he has lived in all these
years, the house where Biff and happy grew up, Willy is a tired little man surrounded by a world
that is hemming him in and exhausting him. What was once the peaceful countryside with
sheltering elm trees, is now a threatening city, where people compete for the very air they
breathe:

WILLY: Why dont you open a window in here, for
Gods sake?

LINDA (with infinite patience): Theyre all open, dear.

WILLY: The way they boxed us in here. Bricks and windows, windows and bricks.

LINDA: We shouldve bought the land next door.

WILLY: The street is
lined with cars. Theres not a breath of fresh air in the neighborhood. The grass dont grow any
more, you cant raise a carrot in the back yard. They shouldve had a law against apartment
houses. Remember those two beautiful elm trees out there? When I and Biff hung the swing
between them?

LINDA: Yeah, like being a million miles from the
city.

WILLY: They shouldve arrested the builder for cutting those down. They
massacred the neighbourhood. (Lost.) More and more I think of those days, Linda. This time of
year it was lilac and wisteria. And then the peonies would come out, and the daffodils. What
fragrance in this room!

LINDA: Well, after all, people had to move
somewhere.

WILLY: No, theres more people now.

LINDA: I
dont think theres more people. I think

WILLY: Theres more people! Thats whats
ruining this country! Population is getting out of control. The competition is maddening! Smell
the stink from that apartment house! And another one on the other side...

Willy is being crowded out by his age, by change he can't keep up
with and by his own failed and contradictory dreams and inner conflicts. More and more, he
drifts into the past, which is the only refuge for this man on the verge of utter collapse. His
peace of mind, like the peaceful surroundings of the home as it once was, is now beset by his
weary present and his almost unbearable toil and struggle to make a living and still walk with
pride. He is losing ground on all fronts.