I see that you have listed yourself as a potential home buyer. While the general talk it that prices have been diealed back to 2003 prices again, this is based on more of a general theory than an actual practice. Some areas have been greatly improved since 2003 as a result of people coming into neighborhoods and taking pride in their ownership. Even more localize, some buyers who bought spent thousands, I mean 200,000 or more in some cases, really fixing up and updating a single property.
A buyer who is looking at homes in this area will be comparing this home to others, as will a buyers appraiser. Focus on what works for you and you will find the right property. If something is overpriced and the Seller is not willing to reduce the price, then the home wasnt really "for sale" to begin with. It may not be about greed but rather perception of value. Good Luck
If you take into consideration that this neighborhood has decreased in price by just under 18% since the peak, this house is actually worth right around one mil.
Let me know if you have any questions.