Yes, house prices are highly localized. Prices for similar properties can vary quite a bit from block to block, let alone neighborhood to neighborhood within a city. There are parts of Somerville that IMO were more speculative near the 05-06 peak, like parts of Ward 2 and parts of Spring Hill. I'd imagine prices there have weakened more than the Davis vicinity, though a realtor would know better. Same is true in Central Square, where I'm guessing Area 4 will soften quicker than Riverside.

Also, regarding your assessment, note that prices have likely weakened substantially since September/October. This wouldn't affect your city assessment until next year, but might affect a lender's assessment. (Side note, I just took an assessor through my house today for a refinance.)