Perception vs. Reality was an ad campaign Rolling Stone magazine used to convince advertisers its readers weren’t unemployed hippies living in old VW campers but instead wealthy members of the establishment with nice homes in Greenwich, Connecticut.

Real estate web site Zillow.com has a survey out today that also highlights the difference between what people want to believe and what’s really going on in the world. According to Zillow’s research, 62% of Americans believe their home has increased in value or at least stayed the same in the past year. Reality: 77% of homes have fallen in value.

The site has called this the “Not My House!” sentiment and even created a Home Value Misperception Index. That’s the difference between the percentage of homeowners who believe their home increased in value and the percentage that actually did. Presently the difference is 32 percentage points.

Interestingly the number of folks in denial directly correlates to the severity of the fall in prices. In the Western U.S., where 88% of all homes have fallen in value, fewer people think their homes have increased. In the southern states, less harder hit by the housing slump, more people think their homes have increased.

Nationally 90% of those surveyed reported foreclosures in their neighborhood. But fewer than a third of all homeowners support government bailouts for their neighbors who took on more mortgage than they can afford.