I have a background as an appraiser (though I am not doing it now), so maybe I can help with the difference between Zillow and listing prices.

In “down” markets, sale prices will always lag listings, especially when sales are slow. I don’t envy appraisers in this market. What do you do in a neighborhood where you have three sales that may be four months old and three listings at prices lower than the sales would indicate? You know the sales are not an accurate reflection of current value…but what is?

Conventional wisdom is that listings determine the bottom end of the value range – i.e., the value of a home cannot be less than the asking price of similar homes in the area. However, in a very slow market, listings aren’t an accurate indicator of value, especially if people listing homes have not “faced the music” and recognized where the market REALLY is. That’s my hunch of where the market is right now – massive mismatch between where the sellers want to sell and where the buyers want to buy.

This mismatch will probably last until foreclosures start. Lenders hate holding properties – they aren’t set up to be landlords, they have to add staff to do it, etc. etc., so they will dump properties for what they can get for them. I appraised commercial real estate in the last huge So Cal downturn and I was shocked at how banks dumped properties.