(02-10) 18:57 PST -- Perception is finally catching up to reality when it comes to home prices.
A quarterly survey by Zillow.com and Harris Interactive of how people view the value of their homes shows that more people now realize that their single largest asset is declining in value.
More than half (57 percent) of 1,573 homeowners surveyed now believe that their home lost value in 2008. That still lags the reality that 76 percent of all U.S. homes declined in value in 2008, according to Zillow's figures.
A full quarter of homeowners had the sunny view that their home's value had increased; in reality, 20 percent of homes did increase in value during the year, according to Zillow's reckoning. Another 18 percent insisted their homes' value was the same, while only 4 percent of homes actually kept their value, Zillow said.
Previous surveys showed homeowners mired deeper in denial, convinced that their own homes were immune to the nationwide plunge in real estate values that started about 2 1/2 years ago. Just six months ago, only 38 percent of people surveyed believed that their homes were declining in value.
That's despite constant bad news with headlines, TV news reports and respected indexes such as Case-Shiller trumpeting the onslaught of foreclosures that caused home prices to fall faster than a rock dropped from the top of a tower.
"Up until now, people have been pretty resistant to external data about the housing market and have continued to say their homes are doing quite fine," said Stan Humphries, vice president of data and analytics for Zillow in Seattle. "The events of fall 2008 with bank failures and large companies going out of business marked a turning point in many people's heads about what's actually happening. The fact that the economy is having larger troubles makes them more aware of what's happening to home values."
Still, people remain optimists when it comes to real estate's future prospects. More than two-thirds (70 percent) of homeowners believe their home's value will either rise or stay the same during the next six months. That's far more cheerful than any economic forecast, even that of the perpetually upbeat National Association of Realtors.
"We're optimists by nature," said Daniel McGinn, author of the 2008 book "House Lust: America's Obsession with Our Homes." "It's a lot easier to ignore the decline in value of your house than of your stocks, bonds and 401(k). There is only so long you can ignore opening your 401(k) statements."
Of course, unlike 401(k)s, homes don't come with handy guides to check their value. That's where services like Zillow, which was founded in 2005, try to step in. By offering value estimates for millions of homes, it became a social phenomenon, tapping into people's voyeuristic curiosity and real estate mania.
"One thing that makes homes such fascinating elements in our lives is their illiquidity," McGinn said. "You can't wake up tomorrow and look in the newspaper to figure out what your house is worth. It takes work - hiring an appraiser, doing competitive analysis, talking to Realtors. At the end of the day, you never really know what your house is worth until you sell it."
Homeowners in the hard-hit Western states are the most pessimistic nationwide. The survey showed 70 percent of homeowners there believe their homes are worth less - although the actual percentage of homes that decreased there clocked in at 90 percent.
A nationwide survey of homeowners found that more than half now know their homes lost value over the past year when 76 percent actually did.
-- Home is worth less: 57%
-- Home is worth the same: 18%
-- Home is worth more: 25%
-- Homes worth less: 76%
-- Homes worth the same: 4%
-- Homes worth more: 20%