The main answer is because it is much, MUCH easier to build a house rather than chisel a space out of rock. Rock is hard. It's so much easier to make mudbricks or stack smaller rocks to make a shelter.
What homes were made in rock faces began as natural caves, much like the ones at Qumran in Israel (where the Dead Sea Scrolls were found). These spaces were already formed, and some were modified a little to make them more comfortable, but the work of hollowing out a space was already done. And even at Qumran, they built structures separate from the cave-homes.
There are other reasons that building homes is preferable.
Caves often have water leaking through the rock and into the cave. This is what makes stalactites and stalagmites. Also, depending on how the entrance of the cave is formed, rainwater can often wash in from the outside. So caves are less desirable than homes for this reason. The caves that were used (like in Cappadocia or Qumran) were in more arid areas, and were much drier.
When you build a house, you can decide where you want it to be. With caves, it's not possible to decide to get closer to the river that provides drinking and irrigation water for you and your crops. Building a house increases the number of resources you can access, which is very important. Caves are only found in specific, limited types of locations, and those locations are rarely the places best suited for maximizing the resource potential of the land.
Rock faces limit the number of people who can settle in a space. When building homes, a group can expand easily and quickly in almost any direction as necessary as the group grows. Caves/rock-cut dwellings do not provide this flexibility, as it is much harder and more limited when trying to expand.
So it makes much more sense to build homes rather than cut them out of rock. The labor differential is much more in favor of building homes, and the flexibility afforded by building is too valuable.
That's not to say that people never did it, as people made great use of caves and underground caverns on many occasions, such as at Beth Guvrin in Israel. But people built homes as well in all of these locations. Even at Petra, the site made famous by Indiana Jones and the Holy Grail, they constructed buildings outside the caves. It's just more effort than it's worth in most cases to cut a home out of rock when you can just build a home out of materials that are all around you.
