One of the places we regularly visit has a tree that houses gnomes:
Lucia knocks on the door every time we go by, but alas, we always come by on market day, and the gnomes are never home:
We have a pine tree in our back yard that would be a perfect residence for gnomes. We've sent out the word. The housing market is difficult right now, and so far, there have been no inquiries about the property. However, I feel confident that we shall have gnomes take up residence in our pine tree before the summer is over. Gnomes make excellent neighbors. They weed gardens and water the plants.
March 29, 2013 update: Since this post, I have received a number of lovely emails from people who have shared links to their own fairy houses/gnome homes. Some people have asked me if I myself make gnome homes. I do not, but I know of other artisans who do. One of my favorite sites is Lucinda Macy's Willodel shop on Etsy. I also enjoy browsing through the shop of Casualee.