Where It All Goes Down
20th-Century Detroit Suburbs
The narrators never specifically mention it, but they live in an affluent suburb of Detroit, Grosse Point, where Jeffrey Eugenides himself grew up. The clue is at the very end of the novel, when the narrators are describing the demise of the neighborhood:
Families moved away, or splintered, everybody trying out a different spot in the Sun Belt, and for a while it appeared that our only legacy would be desertion. After deserting the city to escape its rot, we now deserted the green banks of our waterlocked spit of land French explorers had named the "Fat Tip" in a three-hundred-year-old dirty joke no one ever got. (5.39)
Middle-class families had left the city to avoid its "rot" (aka immigrants, race riots, crime, poverty, traffic) and tried to build oases like the one in which the Lisbons live. Unfortunately, even their safe suburbs can't keep them safe from themselves. The deterioration of the Lisbon home is a stand-in for the demise of the American dream. The book reveals the neighborhood to be a sterile, mundane, conformist place where people preoccupied with just themselves can't understand a family like the Lisbons.
Eugenides has often spoken about how the demise of Detroit due to the decline of the auto industry strongly affected him. He said he assumed it would have affected the Lisbon girls as well:
I grew up watching houses and buildings fall apart and then disappear. It imbued my sense of the world with a strong elegiac quality—a direct experience of the fragility and evanescence of the material world.
That was what I was really writing about. I had imagined a family of suicidal sisters, five brief lives, and I'd put them in an atmosphere of ruin and decay—the dying automobile plants, the dying elm trees—but the source of all this, psychologically and emotionally, had to do with the impermanence of everything I knew as a child. (Source)