I'm surprised they're aggregating at the zip code level. The neighborhood differences within a zip code seem too great for an average measurement to have much meaning to an individual homebuyer/seller. Case Shiller breaks values down into three tiers of price, which provides a little more insight.
Realtors can and do handle price reductions by delisting and relisting the property. This hides the ask price drop, and zeroes the days on market, to the advantage of sellers and realtors. A brief look at Trulia's "methodology" description suggests that they are just mapping these easily gamed MLS numbers.