We can't really be sure where we are, but Shmoop likes to think we're in surburbia. Or Suburgatory as some like to call it. After all, the houses are haunted, and no one's having good dreams.
Yep, this is the land of the boring, the stock and standard. Pleasantville. Mayfield. Mayberry, even. Sure, this poem was written in 1915, before suburbs were really the thing, but the social and emotional climate is much the same.
This poem takes place in a world of conformity, where everyone wears the same night clothes and dreams the same old dreams. Only the sailor, who has gotten outside that comfort zone, and seen some of the world, has dreams worth remembering.