Agree with Waar staan de huizen? Dutch is more likely to use zitten, staan, leggen for location (concordant with position of the object) than zijn.
Waar staten de huizen? is not correct?
"Waar staan de huizen"
Why is 'Waar liggen de huizen?' wrong?
Houses are erected to stand upon the building site, not lying on the site. It is a distinctive concept that is not usually referred to in English.