Question 1: "Should a house be blessed every year?"
Question 2: "What should a family do to prepare for a house blessing and what should they expect?"
There are two types of house blessings: The blessing of a new home, and the blessing of a home at Theophany.
The Blessing of a New Home
The blessing of a new home is done only once, and is a more elaborate service. A table is needed, which should ideally be covered with a nice cloth, on which the priest will place the Book of the Gospels, the Cross, four lit candles, Holy Water, a hand censer, and a small bowl or cup of olive oil. Ideally this table would be in front of, or very near, the family Icon corner.
Other priests may handle this differently, but what I would like the family to have in such cases are a bowl the holy water, and a small bowl or cup with olive oil. I bring the Gospel, the Cross, the hand censer, and the Holy Water, and usually bring the candles with me.
During the course of the blessing of a new home, the olive oil is blessed and a small Cross is made with it on the four sides of the home. The four candles are placed below the Crosses, after each one is made. Then the house is sprinkled with Holy Water, at which time a member of the family (usually the head of the house) leads the priest around the house with a candle in his or her hand, going through all the rooms of the home in as much of a circle as possible, and ending back at the same place the service began. Then there is a Gospel reading, and then the house is censed, and again a member of the family should lead the priest around the house for that purpose, just as with the blessing of Holy Water. Then, after a litany, there is a dismissal, followed by the singing of "Many Years," and everyone in the family kisses the Cross.
You can find the text for this service, in Word format, by clicking here.
The Blessing of a Home at Theophany
The blessing of a home at Theophany is done each year on or after the feast of Theophany, but before the beginning of Lent. All that the family needs to have ready is a candle and a bowl for the Holy Water, which should be placed on a table, which would ideally be in front of the family Icon corner. You should also make out a list of both the living and the dead that you would like to have commemorated, which should include all the members of the family. The family commemoration book used at the Liturgy can be used for this purpose.
The service begins with the usual opening prayers ("Blessed is our God... the Trisagion, etc), followed by the singing of the Troparion of Theophany. When we begin singing the Troparion, this is when the priest begins blessing the house with Holy Water, and so a family member with a candle in hand should lead him around the home, going through all the rooms of the home, making as much of a circle as possible, and ending back at the same place the service began. Then there is short litany, a prayer, the dismissal, and the singing of "Many Years." Everyone then kisses the Cross and is blessed with Holy Water.
You can find the text for this service, in Word format, by clicking here.
If you would like the priest to stay for a meal, you should discuss that ahead of time, so that the scheduling of other house blessings allows for it. If there are several homes close together, it is nice to bless them all relatively quickly, and then for everyone to get together at one of those homes for a time of fellowship. However, all of this is up to each family.
The reason why we bless homes each year at Theophany is because all of creation is blessed and renewed at Theophany, and this blessing and renewal is brought to each home, every year. Every Orthodox home is a little Church. We have communal prayers in our parish Church, but we all should also have a life or prayer in the home. Once each year, the Priest comes to each little Church in the parish, and leads the family in this service of blessing.
See Also:
Homily on Theophany by St. John (Maximovitch)