I hate always hearing about "Instanced Housing" being a magical cure. By creating seperate instances for housing you seriously hurt the RP community and the players who enjoy meeting neighbors and showing off your house. Also not having your house visible to everyone all the time would mean little incentive to decorate causing the prices of housing to fluctuate.

I believe we need a hybrid system where people who want to experience the neighborhoods can, then you could also make seperate instanced housing for players otherwise (Think about how your house was in Fable 3 for example).

You could effectively choose to live in a subdivision with people or in the country alone.