Step 1: Gathering Stuff
there is plenty of pallets to gather for free, and how to disassemble is found here on instructables.
portable drill and drill bits
deco paint, I got 5 colors from white, light blue, pink, purple, gray, pastel all.
Matt black spray
saw, like tablesaw or crosscut jig
battery christmas lights
Step 2: Building Houses
I used both the beams and slats for different widths and thicknesses.
to create the roofs, cutt off 45 degrees on both sides of the top of a house.
that's all, it hasn't to be that straight or exactly, use your creativity and imagination, or just saw.
for "the street" I used a flat piece, and sprayed it matt black.
I painted the houses with deco paint, I Luke the nice pastel colours, I gave them 1 layer which was enough, its also possible to give 2 different color layers and after drying, lightly sand off one to get a rustic look.
Step 3: Assemble the Houses on the Street
you can add small christmas balls or snow, or other things for every season of the year you can add it leave things to make it nice.
that's all, sorry for my bad English, I'm Dutch.