I think it's pretty weird that she does it when its you and her alone. I mean it "could be" that she is comfortable walking around almost naked in the house but she knows she can get in trouble by your parents. But then...why a thong? it could also mean she is trying to seduce you. I think you should tell her you are uncomfortable with her wearing that and she should change into more appropriate attire.
i hate to pop your incestual bubble but she is most likely just being comfortable in her house and around her dear brother who she would never suspect is having weird thoughts about her. just leave her alone or start walking around in your underwear if she says anything tell her you will only cover up if she does. if she refuses then you can both be half naked all you want.
It's somewhat natural to feel excited when you see boobs and ass, especially if your sister is in her prime. Just tell her that you don't feel comfortable seeing her in her bra and thong. Otherwise, just don't pay attention to her at all.
Well it must make you uncomfortable to be posting this on here. You should just tell her that. Ask her please dont walk around in your underwear around me, it makes me uncomfortable. If she refuses tell your parents she won't put her ass away. Lol. Good luck.
Penises have a mind of their own. Dont mind if it gets erect from seeing her in her underwear.