I would caution you about the condo option, as I don't know how many condos would allow woodworking or provide a sufficiently private, quiet space to do that in. Maybe if you found one with a private, enclosed garage, but where I live, that is more in the realm of townhouses.
I think if you are serious about house-hunting, you need to really double down on tracking your expenses and figuring out a "real" budget, not just to save the money, but to figure out how much you can really afford while meeting your savings goals. Savings/401(k) should never hinge on what other expenses you have that month; you should plan for those "lumpy" expenses by putting enough into your bank account every month that you can pay the insurance bill and new tires for the car and whatever when they happen, without having to cut back somewhere else that month. Because there are always lumpy expenses and unexpected events; if you don't plan for them in advance, you'll be 10 years down the road wondering why you can never hit your savings target.
This ties in with the need to track your spending: you are repeatedly surprised by lumpy expenses because that's all the non-routine stuff that you don't tend to think of when you are just trying to list out your monthly expenses. Track your expenses with Mint or YNAB or something similar for at least 6 months, and you'll get a better sense of all of the things you are missing -- the occasional co-pay or prescription you didn't put in for reimbursement; Home Depot runs for things like sandpaper or oil or tool repair/replacement; the dollar you put in the soda machine; the food cart you bought in cash and forgot about; etc.
Specific questions/comments:
Why is your car insurance so high? Is it because you just turned 25, and the rate was based on less-than-25-yr-old male driver? Is it because your car is relatively expensive? Shop around here.
I understand you need a car for backup days, but does it need to be a car worth $11K? If you are serious about saving for a downpayment to buy a house within your timeframe, these are the kind of choices you have to make.
You do not need AD&D insurance. No one does. You do need disability insurance.
You are right that food spending is high. Since you seem to be held back by fridge space, can you fit a mini-fridge in your room for extra storage?
Amazon/household/clothes is extremely high -- and I suspect it's higher than this, because if you're at all like me, you find the process so easy and smooth that you just flat-out forget about some of the stuff you bought. I assume much of the clothes was work-related, but you likely have a sufficient wardrobe now, so put a moratorium on that while you're saving for a house.
Finally: there's no such thing as a "fairly unnecessary $10K." Hell, there's no such thing as a fairly unnecessary $10. You worked for every penny of that money, and every one of those dollars owes it to you to account for its actions -- every dollar needs to dedicate itself to your highest priorities. But sadly, dollars tend to be fairly unreliable employees; if you aren't paying attention, they'll happily fly off to happy hours and Amazon (hard to blame them, right? Much more fun in the moment than going into a boring savings account for a boring house). Luckily, you're Management -- hell, you're the owner of your own sole proprietorship. So be a good manager and keep those dollars in line and doing their jobs.
