I think you should build the 700 square foot house. You'r right, it would be perfect for a single person or a couple. My wife and I lived in a 600 sf apartment for years with no trouble, and now that we have a kid, we live in a 1100 sf house that feels gigantic to me. I can't imagine ever needing more space than we currently have, and could easily get by with less, seeing as the master bathroom is a wreck so we've only been using the other one (tacked onto the endless list of projects...).
IMHO, the absolute best decision you can make is to spend a smaller amount, build something more durable and maintenance-free, and then stop caring care about the resale value.
Somebody will see the value and buy it. I guarantee you. And if nobody does and you would have to sell it for $10k less than the inflation-adjusted value of what you paid to have it built? Who cares! You just live there as long as you want, enhanced by the fact that since you didn't sink as much cash into it, we were able to reach financial independence sooner.
Or how about this: scrap the plans, keep working, and then, once you reach FI, provide a bunch of the labor yourself to build the house, specially choosing materials and styles that are easy to DIY (dry-stack blocks with surface-bonding cement applied to both sides, for example--totally code-compliant and you can do it yourself). The cost savings from that kind of activity directly translate into a lower risk of people not seeing the value of the house and lowballing you.
The challenge is gaining the experience necessary to be able to do this, especially while still working at a non-construction job. My own personal plan is to gain said experience on a "starter house"--hence my current fixer-upper. It's not a starter house in that I plan to "upgrade" to something bigger and more budget-busting; more that it's a learning experience for the 3D printed castle I'm going to build someday.

Human behavior is economic behavior. The particulars may vary, but competition for limited resources remains a constant.
- CEO Nwabudike Morgan