All you need: paper mache dollhouse found at Hobby Lobby or most craft stores (I'm fairly sure I've also seen it at Michael's), various scraps of scrapbook paper, popsicle sticks for added touches, peg dolls (I get mine at Casey’s Wood products), and a bottle of glue.
Here's the price break down, more or less
house- between $2-5 depending on size you buy, that's full price. I time the sales and get it 50% off
peg dolls- if bought at Casey's Wood Products $0.15-$0.30 per figure plus shipping, if bought at craft store, about $3-4 for 10 or so
scrapbook paper- 5 for a $1 on sale, otherwise 4 for a $1, or on hand
popsicle sticks- can be bought for a huge box for about $5 or small pack of 50 or so for a dollar at the dollar store, as could the paper
glue bottle- bought at back to school sales for $0.03, otherwise about a $1
Now you have an instant craft kit that is loads of fun, can provide hours of entertainment, first deocrating the house, then the dolls, and finally playing with your dolls.
For those without a Hobby Lobby, I just checked and it is available on Amazon: Paper Mache Box with Windows Small.
edited to add: link for houses and pricing