I'd argue the harm to a neighbourhood street far outweighs the needs of people in cars.
It creates noise, discourages kids from playing outside, basically it decreases the quality of life generally when the street you live on becomes a river of traffic.
Basically, this new innovation disrupts a balance that has been achieved incrementally over time.
Go into any neighbourhood and talk to people and you will find that over time they have called the city councillor spoken to each other to come to an agreement about how their street is to be used, from parking issues, to street furniture to common access to some areas such as school parking lots off hours for example.
Some of these agreements are formal, others informal and unspoken, but they always exist.
I don't buy your argument that waze, by optimizing for a single variable, and which ignores all of these agreements between residents can be a greater benefit 'overall.'
Also, by solving the congestion problem this way, they actually divert attention away from proper solutions being implemented at the city level.