Our old friend Zillow, the Seattle-based company that provides data on home values in select areas of the country, has just released results of its most recent survey of homeowner perceptions of value.

Zillow's Quarter 3 Homeowner Confidence Survey was conducted October 7-9, during the week that the stock market really tanked (as compared to other recent weeks when it merely tanked.)  This makes the result of the survey even more ironic and indicates that American's are deeply in denial over the state of the economy.

Zillow found that half of U.S. homeowners think that their homes are essentially worth the same amount today as they were one year ago.   Most housing studies would indicate that this perception is wildly out of touch with reality and Zillow itself claims that 74 percent of U.S. homes lost value over the last 12 months if one uses figures from its own "Zestimates."

Even stranger, 32 percent of homeowners actually think the value of their homes has increased.  17 percent feel that their home's value has not changed.

The study is probably not an aberration.  Zillow's Quarter 2 survey had very similar results although perceptions have now tightened a bit.  At that time 62 percent of respondents thought their home's value had increased or stayed the same while Zillow claimed that 77 percent had lost value.

Different regions view the current situation differently.  In the West, where much of the boom in housing sales and prices took place only to be followed by a bust, huge inventories of unsold houses and hundreds of thousands of foreclosures, more homeowners were facing up to their lost equity.  65 percent of western homeowners said their home values had declined, 22 percent felt they had stayed the same and 13 percent thought the value had increased.  Zillow's figures indicate a decrease in value in 85 percent of homes.

The Mid-West mirrors national opinion with 51 percent seeing a decline, 22 percent an increase, and 16 percent no change.

In the South which includes the first or second biggest boom and bust state, Florida, homeowners were still optimistic.  Only 47 percent felt that values had dropped, 21 percent that values were unchanged, and 32 percent saw (or imagined) an increase in value.  The South, however, also contains several states - North Carolina and Virginia for example - where the economy, up to very recently, was doing well so perhaps there is some reality in these answers.

In the Northeast 45 percent of homeowners believed values had declined, 23 percent increased and 19 percent saw no change.

The survey also asked homeowners what they thought would happen to their home's value in the next six months.  40 percent voted for a decrease in value and the same percentage thought things had stabilized; 21 percent were looking for an increase their asset's worth.

It is intriguing that survey respondents were much more pessimistic about their neighbor's homes.  When asked to predict the outlook for their local market for the next six months 57 percent thought home prices would decline, 18 percent believed they would increase, and 24 percent were not anticipating any change.

Survey results were presented in an article by Amy Bohutinsky, Zillow's Vice President of Communications.  Ms. Bohutinsky commented that such optimism - or denial if you will - is not necessarily bad.  "It might not matter if you plan to stay in your home for the next several years and aren't making financial decisions today based on presumed equity. It's sort of like the way I'm avoiding looking at my 401k statements - it doesn't affect me today, so why get depressed. But for sellers, an unrealistic view of your home's value today can only hurt."  It can hurt the homeowner when the home sits on the market for months, and it hurts the local market at large as it deals with "a continued and growing glut of inventory that's just not selling."