In case anyone is curious, we went with the simple "Bobby's house is broken. Bobby's family is living in a new house until they fix their old house." Also, we avoided passing the burned house until he had seen his friend in the new house a couple of times. Sometimes he brings it up ("Bobby house fall down"), and he seems a bit concerned about it, but we try to reassure him that everybody is OK, and that the house just needs to be fixed.
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