I lived in a house once where we could hear conversations from a house that was down in a valley a block or so away (no houses between us) -- someone explained it to me as an effect something like an echo, where sounds can be heard even from pretty far away due to an acoustics kind of thing.
We live in a detached house around 20 feet from the nearest house and we can hear a dog bark in there, even with our windows closed. Previously, we lived in an apartment complex and never heard a thing, except when the upstairs neighbor walked across the floor, and very rarely when his newborn cried.
In Seattle, when I lived there, the houses were much closer together (sometimes 6-10 feet) and we could hear conversations if the windows were open.
So it seems like you could set it up however it would work out for what you want to happen in your story.