Homes is more than a place anyway! So long as it was filled with people you loved I bet even the coldest and wettest rock would be nice. :)
Yep! We built them right in the branches! My house wasn't, because I lived with my dwarf friend Flint and he refused to live up in the trees (I think he was afraid, which is just silly), but most of the shops and houses were built up in the trees!