This is not a new idea. Like a thousand other knitters, I got the idea from the wreaths Starbucks had in their stores a couple of years ago. I finally got around to making one for my front door.
My mom liked mine so much, she asked me to make her one, which (being the good daughter that I am), I did this morning.
This may be the easiest project you'll ever do with yarn. Get yourself an 18" wire wreath form ($2.99 at Michaels) and a bunch of styrofoam balls in different sized. I used 12 3" balls, 6 2.5" inch, 12 2", and 12 1.5". This is the most expensive part of the project, since styrofoam is evidently far more costly than I ever imagined. Michaels has the best prices I could find, and if you print out some online coupons, you can get them more reasonably. Grab some leftover yarn in whatever colors you want (or pick up some cheap acrylic while you're at Michaels), and whatever other ornaments you want (I bought a bag of mixed miniature glitter balls at Michaels for $4.99).
Wrap yarn around the styrofoam balls until you can't see any styrofoam and tuck the end a few strands to hold it in place. When all the balls are wrapped, heat up your hot glue gun and get to work! It took me about an hour and a half to wrap the yarn, and another hour to put it all together.
If you have to buy everything, including yarn, glue gun, and glue sticks, this project will run you $40-50. If you already have a glue gun and yarn, and you use coupons for the styrofoam, you can get it down to about $20, which is pretty reasonable. You don't have to use Christmas colors, of course. You could make one in blue and white for Hanukkah, or pastels for spring, or autumn colors for fall, or whatever you want for any time of year.
I suspect my door may be graced with yarn ball wreaths year round from here on out.