The US has great radar capabilities, so we obvious knew it was there. I think that raises the question of why we didn't shoot it down. Maybe we were curious where it was going and we wanted to see how capable at navigating it was? Is it too dangerous to shoot down over land? What was the diplomatic communication with the Chinese? There's many questions that may never be answered in public.
It seems more than likely that this had little surveillance abilities that a satellite doesn't already have, so little intelligence risk. Maybe we went as far as to plant a false target for it.
Alternatively, if this had weapons on it, dropping it on land seems pretty dangerous compared to off the coast.
Additionally, out of diplomacy, we should communicate with the Chinese that we're about to blow their stuff up, especially when they politely pretend it's civilian. Civilized nations need to play political games before we can blow up "civilian" equipment.
Beyond all this, some other comments here have claimed that these balloons have been going on for a few presidencies now, without any being shot down. So why is it a concern now? I'd be worried about suddenly war-hawking something that hasn't been a problem. There's enough going on in the world without a degrading US-Chinese relationship. This is probably simply the case that it's a non-issue that got too much attention and needed to be addressed publicly.