All of the above.
It all depends on my inspiration.
Most of the time I decorate the interior as well as the exterior of my homes. At the witch's. On the theme of a psychopathic hitman... On the theme of vine and wine at Maison Gardner. At the farm.
Sometimes I decorate the outside more than the inside like at the Mathisen mansion.
Moon Sugar Meadow : old temple, house...
But sometimes, because there isn't enough slots I focus on the outside only (like at Artaeum or at the Lucky Cat Landing)
This is gonna sound very strange. But the houses tell me what they want to be. Not in a literal sense, but like....I will walk around a house a long time. I will read the loading screen. I will think about the name of the house. I will think about the places nearby, and really look at the architecture. I will also imagine the kinds of characters that inhabit it.
And then eventually I will come to a conclusion about what kind of place that house is and who would inhabit it. Only then do I decorate it.
I only have a couple of smaller homes. The big ones just don't speak to me as much. But they all have a theme.
I have a rich imperial scholar's away home at the Cyrodiilic Jungle House. I have a Lunar observatory at Sleek Creek. I have a temple to the eight divines at Exorcised Coven Cottage. I have a skooma lounge at Snugpod. And I have a twisted torture den at Hammerdeath Bungalow where my vampiric Dark Brotherhood assassin "plays" with her food.
Each one has all furnishing themed around these ideas, rather than stuff that done just because it would be gorgeous or fits into the space. Nothing wrong with that style of decorating, in fact I have seen some jaw droppingly beautiful homes that are decorated that way. It's just not how I personally decorate.