You cannot sell the houses, because doing so would put you into a negative population position, so of course, makes sense you cannot sell. However, I imagine you have other buildings, that require population, such as Goods or Supplies, or even Military buildings - if you sell some of those, you will have population available, and then you can sell some of your houses to make new, larger houses.
Best thing to do, is make sure you have enough space available to create even one new larger house, then use that increased population to sell smaller houses.
Also, houses, once built, do not require a road for the population to be used (you need the road only to create Coins), so if you have space, move a house or two away, or delete some road space.
I am assuming you must be relatively new to this particular type of game, since many games use this same methodology, so once you understand how to use it in one game, it is relative to be used in others.