Here's another report, this time from the IGN Vault Network.
Here's a snippit from the article:
Coming in the near future is a full housing system. We were shown a bit of what this will entail. Called Castles and Lands, houses are little pocket universes. They are floating islands on which players will be able to fully customize every aspect. The islands themselves will have different traits depending on which city they are purchased from, but placing trees and plants and objects outside, to entering the house and fully customizing everything inside, will all be possible. It even goes so far as placement on top of objects. Players will be able to place a rug on the floor, then place a table on a rug, then place a vase on a table. And everything will be able to be moved around.
Don't miss the slew of screenshots they have available.
This Krokotopia one really caught my eye.