The case could be made that this is a scenario that exists in most neighborhoods. Identifying value is one of the many services offered by an experienced real estate professional.
We would recommend that prior to "pulling the plug" and moving on that you engage in additional research to arrive at an accurate appreciation for the community market. Keep in mind that in this market, sellers often assume that buyers are going to make a lower offer and increase their asking price to include this anticipated activity. The result is a market that appears overvalued. These prices are however, not the information you need to focus upon when considering this area....Buyers should be concentrating their efforts on the actual "sale prices" of home sold in this location.
Further, as a buyer financing your purchase, the lender will insist on an appraisal to support their investment in your purchase. This fail-safe should protect your interests as well. In the event you are a cash buyer, it would be beneficial to request an appraisal yourself...
Working with a realtor that knows this community should provide you with the information and support you require to make a sound purchase.