So you could argue here that it makes no sense for Mr Tumnus to be confused by the terms "Spare Room" and "Wardrobe", since he not only speaks perfect English, but also lives in a house containing many pieces of standard human furniture. It's also not like Narnia is a world that has different terms for different things when compared to our world (a sewing machine is still a sewing machine)

However, if you are going to offer some sense of explanation for the line, and not just write it off as a cute bit of humour, then I guess you could say that Tumnus is suffering from what you might call "cognitive dissonance" (i.e. where your brain malfunctions slightly because it is receiving contradictory information from your surroundings)

Of course he has heard of the terms "Spare Room" and "Wardrobe" as English Language terms,.but when he hears them spoken in the context of the question he asked ("where are you from?") and in the context of the location he is in (a snowy woodland) then his brain is simply attempting to infer a more logical explanation for her response - that it must be the name of a city and country respectively, as these make much more sense as responses when you ask someone in the middle of a snowy woodland where they are from.

Imagine if it were you, and you were out walking in the woods one day and you asked a passing stranger where they were from. If they said "from the Wardrobe in the Spare Room" you are very unlikely to suspect that that had just stumbled through an interdimensional portal, and much more likely to assume these were obscure place names from a country you've never heard of

“I wish I were better at geography as a child”.  There are some  people in our world that aren’t very good at it either.   Interestingly enough, Lucy doesn’t explain to him that the wardrobe and the spare room are in a house and so I guess he continued to believe they were places.  He might have found out later what they really were. I think there is some humor in Spare Oom and War Drobe, but of course the encounter of Tumnus and Lucy was serious too.  It does make sense that Tumnus would be baffled by something from our world. Meeting someone from another world was a whole new experience for both Tumnus and Lucy.

Good points, @narnian78 and @icarus... I have to admit I'd never stopped to think about the possible inconsistency there! I remember I just found it amusing when I was little, which I expect a lot of young readers do.

However, when we think about what we know of Narnia during the Witch's reign, there are no humans living there at all — Lewis at the time of writing made it that there had never been humans in Narnia before. This of course changed when he later wrote The Magician's Nephew, in which we learn that humans were there at the creation of Narnia and it had human kings and queens from the start. But somehow along the way — Lewis never got around to explaining this inconsistency he'd created — the humans in Narnia must have all died or disappeared well before Jadis, now the White Witch, returned from the north and began the Long Winter. (Which lasted for 100 years — not nearly long enough for the Narnian creatures to forget about humans completely, which is why I assume the descendants of Frank and Helen had all died out or moved to other lands at least a few centuries before that. There's got to be some fan-fic potential in there somewhere. )

Anyway, what we have in LWW is a land where the sentient creatures speak English — because (again, we find out from MN) that's the language Aslan spoke when he created them, presumably foreknowing that he was going to give them an English-speaking King and Queen — but there have been no actual humans for long enough that many (if not all) of the surviving Narnian creatures have forgotten about them. And even though some of those creatures do live in rather human-style homes, the ones we see aren't as big or elaborate as most houses built by humans in our world. Mr Tumnus's home is a cave that's divided into two rooms (we're told there's a door that Lucy guesses must lead to his bedroom), but presumably no more than that. The Beavers' house, from what we see, is all one room, as it includes their bunk beds set into the wall as well as their kitchen and dining area.

So perhaps it could be that even for those Narnian creatures who live in "houses" of some sort, those houses are generally so small and basic that a Faun like Tumnus simply has no concept of a "spare room", because he's never known a house big enough to have such a thing? And as for a wardrobe, as far as we see, the only piece of clothing Tumnus wears (even in the snow!) is a scarf; the Beavers have snowshoes, and the text says there are "gum boots and oilskins" hanging on the walls of their house, but we're not told they have any other clothing. Logically, creatures who wear very few clothes have no need of wardrobes. So it does make some sense, after all, that that too is a word that Tumnus doesn't know.

Mind you, I doubt that's something Lewis himself thought out in detail when he was writing the book (given all the other illogicalities in the story that critics pointed out even in his time — like how could Tumnus and the Beavers possibly get flour for baking, or sugar, or oranges for marmalade, or indeed potatoes, in the midst of perpetual ice and snow!! ). From an authorial standpoint, I've always guessed that in that first conversation between Lucy and Tumnus, Lewis is intending to give us a sense of how different these two characters are from each other — that Lucy and her world are as strange to Tumnus as he and his world are to her. There's just a delightful naïveté in the way the Faun misunderstands "spare room" and "wardrobe" as "Spare Oom" and "War Drobe" and assumes these are a country and a city, which underscores the fact that Lucy really has just stepped into another world entirely. Then on top of that, one of the books Lucy sees in Tumnus's cave is called Is Man a Myth? — implying that we're now in a world full of creatures that we humans regard as myths, only to discover that those creatures regard us as a myth. So I assume that's the sense of surprise and mysteriousness and excitement that Lewis wanted to create in this scene, whether or not there's watertight logic behind it...