It's explained in The Prisoner of Azkaban that the Shrieking Shack was built for Lupin. But that's kinda bizarre isn't it? Wouldn't the villagers of Hogsmeade find it strange that someone suddenly built a dilapidated boarded-up creepy looking house in their village? And also they all think it's haunted? Do they believe it to be a dark magic ghost house that built itself?
This is all explained in the chapter titled Moony, Wormtail, Padfoot, and Prongs - which actually takes place in the Shrieking Shack. Lupin tells this part of the tale; he explains that they all think it's haunted because of the screams and howls - and they were made by Lupin (but they didn't know it):
'This place is haunted!' said Ron.
'It’s not,' said Lupin, still looking at the door in a puzzled way. 'The Shrieking Shack was never haunted. . . . The screams and howls the villagers used to hear were made by me.'
And as for the Shrieking Shack you have to remember how you get into it: the Whomping Willow was planted the same year Remus first came to Hogwarts. Lupin explains this in more detail:
'But then Dumbledore became Headmaster, and he was sympathetic. He said that as long as we took certain precautions, there was no reason I shouldn't come to school. . . .' Lupin sighed, and looked directly at Harry. 'I told you, months ago, that the Whomping Willow was planted the year I came to Hogwarts. The truth is that it was planted because I came to Hogwarts. This house' — Lupin looked miserably around the room, — the tunnel that leads to it — they were built for my use. Once a month, I was smuggled out of the castle, into this place, to transform. The tree was placed at the tunnel mouth to stop anyone coming across me while I was dangerous.'
Dumbledore helped spread the rumours of it being haunted as Lupin explains:
'My transformations in those days were — were terrible. It is very painful to turn into a werewolf. I was separated from humans to bite, so I bit and scratched myself instead. The villagers heard the noise and the screaming and thought they were hearing particularly violent spirits. Dumbledore encouraged the rumour. . . . Even now, when the house has been silent for years, the villagers don't dare approach it. . . .'
So what the villagers thought it was were violent spirits - at least that's what Remus supposes; and the shack was built for Remus. Consider this too: if you truly believed something was haunted - and felt threatened - would you consider going closer to it? Probably not. The same could be said here don't you think?
To add to possible explanations of why the villagers didn't question the shack; I can think of a few things to consider.
I don't actually know how visible it is (don't recall but not relevant here because I'll just assume here that it's completely visible) but let's say it's completely visible. Does this mean that people are going to pay attention to it? More specifically are they going to notice it and then think about it? And if they do indeed think about it how much are they going to think about it? They might think it's odd but ask yourself: when they notice it - with the exception of someone just taking a stroll or living nearby and looking outside their house and have nothing else to do - will they stop to explore it when they already have something they were planning to do? Probably not. People are also creatures of habit.
And people have this tendency to believe that others are paying attention to them and this leads to all sorts of problems for the person: fear/anxiety, alone (seeing that everyone else is talking with someone for example) and many other things. But is that really so that people are looking at others and evaluating what's going on in their head (a specialist here doesn't count)? Most people have their own worries to think about; they might have to make a decision or something just happened to a friend or relative for example (in the real world of course nowadays they look at their phone so much that they walk into walls, poles and even the ocean but we know that wizards don't have those).
If you consider these things then most likely if they do notice it they will continue on doing what they were doing before. And if it seemed haunted they probably have no interest going there. Some would but would most when there also are rumours about?
The villagers heard the noise and the screaming and thought they were hearing particularly violent spirits. Dumbledore encouraged the rumor
Maybe Dumbledore didn't merely encourage the rumor, but he had someone create the rumor. When asked whether he knew something about it, he would respond with a hint that it might be something dangerous, without saying something that is technically wrong. People tend to believe whatever Dumbledore says.
Another explanation is from Hermione in the first book, when they are faced with Snape’s logic puzzle.
A lot of the greatest wizards haven’t got an ounce of logic
This applies not only to the greatest wizards, but also to the common wizards.
First of all, we know from chapter 14 of Prisoner of Azkaban that the Shrieking Shack was not really part of the village proper (my emphasis):
The day was fine and breezy, and neither of them felt like staying indoors, so they walked past the Three Broomsticks and climbed a slope to visit the Shrieking Shack, the most haunted dwelling in Britain. It stood a little way above the rest of the village, and even in daylight was slightly creepy, with its boarded windows and dank overgrown garden.
Right off the bat this may be a reason that the villagers pay it less heed.
Second of all, it was not necessarily "a dilapidated boarded-up creepy looking house" when it was first built. We (the readers) don't see it until some 20 years after it was built. During those 20 years it had spent several years being ravaged by a werewolf, followed by many years of abandonment and neglect. The rumors were started when Lupin started using it; once the rumors were started the villagers would henceforth avoid it.
Thus, there was not really any time when the villagers would have been expected to investigate. As soon as it was built it already appeared haunted. According to Nearly Headless Nick (also in chapter 14) the rumor was that a rough crowd lived there:
“I asked Nearly Headless Nick ... he says he’s heard a very rough crowd lives here.
Villagers would be hesitant to go snooping around a house where a rough crowd is rumored to be living.
Therefore, when faced with a new house emitting haunted sounds, coupled with rumors of a bad crowd living there, the simplest thing for the villagers to do is just accept that it's haunted and move on, and for the most part ignore it in their day-to-day lives.
There is a possibility that there was a house there before the shack: this makes it seem likely:
The Shrieking Shack was an abandoned house, with the windows and doors boarded up.
It is possible someone lived in it at some time. However, this piece of evidence says otherwise:
This house' — Lupin looked miserably around the room, — the tunnel that leads to it — they were built for my use.
In this case, maybe the cover story was it was going to be a normal house, but when the "ghost" moved in, they were afraid to get rid of it. Dumbledore encouraged that, and everyone listens to him.