Dee Dee is sick, and Dexter tries to comfort her by reading her a story. Dee Dee fabricates her own tale after she is bored by Dexter's story. Her distinct tale combines elements of several classic fairy tales into one.
Squints tells the other kids about the legend of the beast, a guard dog that was a ruthless killer. In the story, the beast was ordered to be restrained under a house until the end of time and is dreaming of the time it can break loose and chase and kill again.
At Jacob's request, his father tells him a story about peculiar children. He describes in detail where the children live, their special powers, and why they are forced to stay in the house: they're hiding from something.