I know that Zillow does not have a great reputation with Real Estate agents for a number of reasons. It is my opinion that Zillow does track pricing trends fairly well though.
Pricing for the luxury home market is very volatile in this Phoenix/Paradise Valley/Scottsdale market. There are not enough buyers for all of the properties listed. When a seller decides that they are "very motivated" then they drop the price until a buyer is interested. Being that there are many bank owned properties and short sales, this means that prices drop to the lowest price available usually. That is a slippery slope.
During any given month, the properties sold can show a misleading trend-line. All it takes is a few very low priced homes in a slow month to skew the average price downward. If there are no very high priced home sales that month, then we could expect the drop to be exaggerated. (this also works in the opposite direction)
That said, the values in PV and everywhere have been affected dramatically during this market downturn. The best way to really know what prices are doing is to have an agent perform a very detailed analysis of homes like yours. If you have your home listed, this should be something your agent could provide. If your home is not listed, I would be happy to help.