We don't know where the narrator is while he's telling the story of the old man's murder.
The story he tells us, however, takes place inside a house about which few details are directly given: we're told that the old man keeps his shutters tightly locked. A neighbor hears at least one of the story's two screams. The cops arrive promptly, just after the narrator has hidden the body. As such, the house is probably in an urban area, where the police can be contacted easily and respond quickly—remember that all of this is happening before even the invention of the telephone, so contacting the police necessitated physically getting to the nearest police station.
As to the interior of the house, we only hear about the old man's bedroom, which is the a place where horror plays in the dark while the old man sleeps, completely unaware. The room is all the more scary because it isn't described, and because we can't see it. This story taps our fears of the dark, and what the dark might hold.
In speech class you probably heard that a majority of people (in America) claim that public speaking is their number one fear. What about the fear of someone in your own house spying on you each night while you sleep, wanting to kill you, and then being totally friendly to you during the day? Even without the murder part, that kicks public speaking in the pants if you ask us.
The "ideal" bedroom is supposed to be a fairly private place where we can rest and recuperate without fear. The narrator completely violates the sanctity of the bedroom in this story. The night spying is possibly more terrifying for our imaginations than the murder itself.
As with many Poe stories, the landscape of the narrator's mind is also a setting of the story, and it echoes the external or surface setting, the man's bedroom. Just as we are unable to see the bedroom, the narrator is unable to see his own mind.