Zillow.com said it is laying off 40 workers, about 25 percent of its staff, to weather the "economic storm."

The Seattle-based Web site provides consumers with estimates of their home's value based on market trends and sales.

"This was an incredibly painful decision for me and the leadership team, but, in the end, we concluded that we had no choice but to securely batten down the hatches as we sail into a major economic storm," said Zillow chief executive Rich Barton on the company's blog.

The staff reductions are effective Tuesday. Laid off workers will receive severance packages.

The housing industry has seen sales and prices fall steeply as mortgage money becomes increasingly hard to find. Some major banks and financial houses collapsed under the weight of subprime mortgage loans in recent weeks sending financial markets into a panic and prompting Congress to enact a $700 billion bailout bill.

A recent Webware column by Rafe Needleman names one of our favorite Web sites, Seattle-based Zillow, among 11 Web 2.0 start-ups "in serious danger of falling off a cliff."

Zillow's the site that gives approximations of your home's value based on sales and market data of nearby and like properties.

Here's what he says:

"The real estate site's revenue model is advertising. Real estate and bank advertising. Unless the real estate site starts charging for foreclosure listings, I don't see it doing too well in a hunkered-down economy in which people are trying to hold on to their homes for dear life, not upgrade."

At Zillow, as you might guess, they disagree.

Here's part of their reply from Zillow director of community relations David Gibbons:

"We actually do have a revenue-generating relationship with the supplier of our foreclosure listings, thanks, You're right that it's one of the opportunities to make lemonade right now. Zillow traffic is actually up 40 percent from last year. We're fortunate to enjoy a very strong brand in a fragmented real estate market."

Gibbons says on-line ad growth is out-stripping traffic growth.

"I won't deny that these are tough times and there's no free lunch in the real estate media industry right now. We've been very frank about the fact that this market delays IPO plans for Zillow. But there are opportunities in every market and many home buyers and owners are more interested in the value of their homes today than ever."

Big changes to who appraises homes and how they're selected could be coming your way next year, according to a column I spotted at the LA Times by Kenneth R. Harney.

The intention is to clean up a process thought to be muddied by inflated appraisals, which some believe led to today’s home price declines.

Here are some of the key aspects of the deal, which was agreed to earlier this year in New York by Fannie Mae, Freddie Mac and Attny. Gen. Andrew M. Cuomo, according to the story:

• Mortgage brokers, who originate roughly 60% of all new loans, no longer would be allowed to select or pay appraisers.

• In-house appraisers at banks and mortgage firms no longer would be permitted to do appraisals for loans to be funded by their organizations.

• Lenders would not be able to use appraisals generated by management companies -- firms that contract with networks of appraisers nationwide -- if they have a significant financial stake in the management company.

But, for many reasons, industry groups are pushing back, saying that consumers would spend more time and money getting an appraisal on a home they'd like to buy.

Find the full story here.

The Associated Press is reporting that Zillow’s fortunes in Arizona could be looking up. The Arizona House voted Monday in favor of a bill that would overturn an order requiring Seattle-based Zillow to pull its Arizona properties. The Arizona Board of Appraisal last week told the company in two cease-and-desist letters that it needs an appraisers license to post its “Zestimates.”

As of Tuesday morning, Zillow still listed Arizona properties for sale.