Now that gap has shrunk, with 22 percent of homeowners believing their local market will lose value over the next six months and 14 percent believing their own home will lose value.

"Homeowners are finally succumbing to the notion that, in most areas, declining home values over the past year are no longer the exception, they are the rule," said Dr. Stan Humphries, Zillow chief economist. "Almost three times as many people believe their home's value will increase over the next six months as believe it will decrease in value, a level of optimism that is likely to outpace actual performance in the near-term. Given recent news about the stabilization of home values in some markets, I can see why homeowners are so optimistic. However, home values in many markets are still under substantial downward pressure from high levels of foreclosures and we don't believe we'll see a definitive bottom nationally until the second quarter of this year. We're not out of the woods yet."

Northeasterners and Westerners Most Cynical

Homeowners in the Northeast and West are overly cynical about the value of their home. Three-quarters (78 percent) of Northeastern homeowners said their home lost value or stayed the same in the past year when just over half (58 percent) of the homes actually did. This disparity between perception and reality resulted in a Misperception Index of -14, making Northeasterners the least aligned with reality. Western homeowners, who last quarter were the most optimistic and the least aligned with reality, did an about-face in the fourth quarter. They now are slightly cynical with a Misperception Index of -5.

About Zillow.com

Zillow.com is an online real estate marketplace where homeowners, buyers, sellers, renters, real estate agents and mortgage professionals find and share vital information about homes and mortgages. Launched in early 2006 with Zestimate® home values and data on millions of U.S. homes, Zillow has since added homes for sale and homes for rent, a directory of real estate and lending professionals, Zillow Advice and Zillow Mortgage Marketplace. One of the most-visited U.S. real estate Web sites, with more than eight million unique visitors per month, Zillow's goal is to help people become smarter about homes and real estate in every stage of their lives -- home buying, selling, renting, remodeling and financing. The company is headquartered in Seattle and has raised $87 million in funding.