Possibly magnolia, I'm thinking, is higher back in village east of the Shire (8,4)

'shire' is the definition.
Although both the answer and definition are singular nouns, I cannot understand how they can define each other.

'possibly magnolia i'm thinking is higher back in village east of the' is the wordplay.
I cannot really understand how this works, but
'magnolia' could be 'umbrella' (umbrella magnolia is a kind of magnolia) and 'umbrella' is present in the answer.
'east' could be 'e' (synonyms) and 'e' is located in the answer.
'the' could be 't' (the is pronounced as a 't' sound in some dialects) and 't' is located in the answer.
The remaining letters 're' is a valid word which might be clued in a way I don't understand.
This explanation may well be incorrect...

Can you help me to learn more?