One of the biggest misconceptions about markets is that the most recent trade price is the current value. But that's not actually true – it's approximately true in heavily traded markets (like S&P 500 stocks). But for a much less frequently traded market (like brownstones in Park Slope, Brooklyn or apartments in downtown Minneapolis) where there are only a handful of transactions each week, the price doesn't actually reflect value. It reflects the most recent price paid – and if there aren't a lot of buyers, then the actual value is lower than that price.

Most people who have done a lot of options trading have seen this in practice: if you're trying to sell a really thinly traded option RIGHT NOW, most of the time the latest price is a higher than the price you'll get. That's because there was only one buyer at the time, and someone else got that person's bid. So now you'll have to go to the next-most-interested buyer, and you'll probably need to lower your asking price a bit because otherwise he or she would have been the most recent buyer.

All of this is masked in heavily traded markets. But it's a lot more apparent in housing. However, that's complicated by the fact that people REALLY HATE lowering their asking price, so instead of seeing prices drop, housing markets typically just see volume go down. And recent lower transaction prices are often dismissed by sellers ("That person was just desperate to sell, I'm going to wait for someone to pay what my house is worth").