You and the market determine what a house is worth. $5000 is about a difference of $35 a month in mortgage payment. If you like the property I would not let it get away unless you know that your time there will be short. If you know based on market comparables it's too high you may want to walk.
BUT remember there are more terms than PRICE in the negotiation process. The sellers may be nervous to have an offer so quickly and it may not be the price that's the sticking point. Have your agent determine what kind of closiig date and possession date would be beneficial to the seller. Somtimes being flexible on these issues can save you money. Has the seller found another place to live? Maybe they need time to finish a house they are building can you close and rent to them for a few months, maybe you can delay closing a few extra weeks? Maybe they need to be out of town by the end of the month can you close fast and take possession quickly. Is there a brand new fridge in the house that you asked for that you would be willing for them to take with them? You see where I'm going with this. There are lots of ways to write your offer to benefit the seller besides price and if you are in a position to be flexible and offer terms they may not get from another buyer they may be willing to accept a lower price. Of course is goes with out saying that you should have you financing lined up and supply them a preapproval letter so they know you are serious and credit worthy. Good Luck1
Do you love the house? Have you discussed the marketplace with your realtor to determine whether the home is listed fairly? If both of your answers are "yes" then, I would wonder why you would risk losing a home that you both love and is within your budget. When I write contracts for my buyers, if they are making a full price offer, I write in that "buyer requests that the home not be shown during attorney review period". That does not mean that anyone who has already seen the house can't give an offer but new buyers won't be able to see the home. Even in this market the good houses that are priced well go!!!
Good luck to you,