Erika,
I agree with you about the suitability – when I have shared the activity with teachers the infants teachers really loved it, but I always thought it was great for 2nd class. They can really design and make the houses, and match to the actual appearance of their chosen house. I like your emphasis on shape, colour and size and this could be an introduction to scale.
What happens if the house you make is twice as big as the house another child makes — is it really twice as big in reality, or did you use different scales?