Keeping in mind that the value is what a willing buyer will pay a willing seller...can a listing prices of a group of houses in an area become a self fulfilling prophecy and move the market?

Say it is a niche market like a waterfront home where there are some comps but not a lot available. These neighborhoods do not have cookie cutter houses and you could have many reasons for two houses to have very different price/square foot. Houses are not selling for the most part and days on market are very high. My instinct is to say that prices eventually drop to what people are willing to pay to create a sale or the seller waits it out to eventually get what they think it is worth.

However, when a new house comes on, the seller might think his house is worth $500k but sees similar houses listed at 750k and think I'll put mine near that rather than the assumed value because maybe I don't really know what the value is. Then one of the many houses listed that high sells and that makes others think they can get that much when they list.

I might sound like a frustrated buyer that thinks prices in the market I'm looking at are too high. And you would be right.

Interested in any thoughts on how list prices can or won't move the market.