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To make sure it doesn't happen to you again here are a few tips:
1) make sure you have all building materials in stock
2) make sure the house is near the stroage area where the materials are kept
3) only upgrade during non-winter seasons
4) build a stone path to the house first
5) go into first person with a spare villager, press '1' to speed up building
For bigger houses I build another house.
The moment it's finished I press the upgrade button on the original house (or they'll start expecting babies, which will give you homeless ppl).
As soon as it's upgraded I press the upgrade button on the second house and pause (so that there isn't a sudden spike in the population).
If anyone has any other ideas, let us know :)