There are 3-4 bedroom houses out there that can be shared by 4 people

There are, but there aren't many—and they are, in fact, being torn down pretty rapidly. New development of this size/type of housing is absolutely required to keep up with demand (this isn't subjective; a 2011 housing report found that there is "Seattle lacks affordable family-sized housing with three or more bedrooms").

A lot of people are choosing micro housing not because they LIKE it, but because there just are not enough of these unicorn 3-and-4-bedroom houses. And the belief that they are just out there and people are opting not to live in them is flatly, plainly, mathematically, statistically untrue. Which is why I say that setting this up as a choice is inaccurate.

The fact is that probably a lot of people like the idea of living with roommates, but the housing stock simply doesn't allow for it. What's more, it likely won't in the following years; though the HALA guidelines called for increased density (allowing for duplexes, triplexes, etc) in single-family neighborhoods (which Seattle has a LOT of) would help increase the amount of family-sized housing, neighborhood activists have bristled at the idea of allowing for this kind of construction. It's a noted fact that we (/developers) are simply not building family-sized housing in the city at this time. That means it's not so much a choice about whether or not to live alone, as much as a necessity. The rental market is so tight, and there are a lot of actual families that need rental housing, as well.

As far as people who live alone in their larger homes...that's just an indication of the wealth gap and the difference in affordability. There's not really much to be done about that—it's not as if the city can force people to take in roommates.