If Sie is capitalized, it is the formal you. Uncapitalized, is means either she or they.
"Sie möchte ein Haus haben" means "She would like to have a house". While the meaning is similar to "She wants a house", it is technically a different sentence. In English, "wants" indicates a strong immediate desire, whereas "would like" merely indicates a preference toward. In some contexts in English, "would like" is seen as the more polite way of expressing a request.
To clarify, if she "wants" a house, she has some motivation to try and get one. If she "would like" a house, she may accept an opportunity presented to her to receive a house, but she is content enough that she is not going to pursue obtaining a house or may settle for a suitable substitute (or perhaps there is some logistical barrier at present that is keeping her from obtaining a house). It is similar to the difference between a "goal" and a "wish", only in verb form. This is the English difference between the two sentences, but I am not sure if this difference is identical in German or not.
One more example: "I want some food." - Strong desire (Connotation: "I am very hungry right now!") "I would like some food." - Simple preference (Connotation: "I see that you have a snack with you and I am hoping that you will share some with me, but I understand if you refuse.")
Final word of caution: Informally, some English speakers may use "want" regardless of how strong or weak their desire may be, since "want" is one syllable long and "would like" is two syllables long. This is why it may seem that "want" and "would like" are interchangeable.
I hope that this clarifies the distinction from an English perspective. Perhaps a native German speaker can validate or deny the difference between the sentiments from a German perspective.