How do you upgrade your house in harvest moon ds?

First you must buy the Table from the Shopping Network.

To unlock the Shopping Network buy something from Karen's General Store on ten different days.

When you have the Shopping Channel watch it each day until you see the Table for sale. Use the phone in your house to order it.

Once you have the Table in your house you will unlock the option to have your house upgraded.

At that point you can call Gotz the carpenter and ask him to upgrade your house.