In the first movie; set in London, the house exploded at the end. Yet at the start of this one, the house is fine, and being searched by armed American cops (UK cops are not armed).
Has that magic box rebuilt the house and turned London into part of the USA now? That's just stupid.
The first movie was vague about the setting, even though it was shot on location just outside London, due to New World's desire to make the movie more marketable to American audiences. You'll notice that there are a few random characters who speak in American accents, that was deliberate. Frank, Steve, and several other minor characters originally spoke with English accents, and then New World had voice actors perform dialogue in American accents to be dubbed over the original performances. Hellbound merely continued that Americanization.
As for the house, I don't know where you got the idea that it blew up. I've heard some people say that it burned down(which is what happens in the Hellbound Heart), but this is the first I've heard anyone say they thought it exploded. The script makes no mention of the house burning down, and in the movie, the only thing we see is a shot of flames overlaying the house which I took merely as a transition to that field of burning garbage where Kirsty attempted to dispose of the box.
Even if Clive's intention was to imply that the house burned down, it's so vague because we never literally see any part of the house on fire that it's easy to just say that it didn't burn down.
It wouldn't have bothered me either. If New World wanted to be set in America, it should have been planned that way from the start, like Nightbreed, so that there are no weird inconsistencies like seeing recognizable London landmarks in what's meant to be an American city, or Larry saying that the clearly English Julia is "back on her home turf".
She didn't burn anything(except for attempting to burn the puzzle box). Kirsty never went back in the house and she and Steve walk to a wasteland where garbage is being burned. That's how the script describes it at least. Actually the script never mentions anything about the house burning down at all.
I was going to say the same thing. The house was certainly glowing or burning at the end. Maybe the other posters here are right though, about them moving to waste ground for the final scene. It's not the smoothest transition from I to II.