I just bought new kyb shocks and replaced both rear, but I still feel harshness when driving over small cracks or bumps on the road which shouldn't be the case. I also hear loud clunking noise after I run over a bump or crack on the road from the rear trunk area. Does anyone have any ideas what the problem is?

 

Don't know what make the factory shocks are on these, but KYBs have a reputation of being too stiff for some applicaions.
My car is a '96 LE
Because I carry a fair amount of weight and recently added a custom light-duty trailer hitch, I decided to replace my rear springs & struts.
My struts were completely blown out anyway.
I found a good set of rear Camry wagon struts & springs in my local salvage-yard for $65.
(New ones would've been $350 - $450!)
Ride is certainly stiffer but not uncomfortable, and there's virtually no bottoming at road-dips and driveways now.

Common cause of rear suspension noises are worn rear stabilizer-bar links and bushings.
When I got this car two years ago, the rear stabilizer bushings had become enlarged over the years. My quick-fix was to remove the 'U' brackets & rubber bushings and wrap the contact area of the stabilizer-bar with a few layers of electrical-tape.
Then before reinstalling, I lubed the inside of the rubber bushings with a bit of silicone to prevent binding and squeaks. It's lasted two years on mine.

No quick-fix for the links. If yours are loose & noisy, you'll need new ones.

Happy Motoring, Mark