“A home is worth whatever someone is willing to pay for it” is the line many real estate agents used to get home buyers to overpay for houses during bidding wars.

It's very funny to see so many non-agents using it now. Here's why it's not an entirely accurate statement 1/

When prices are rising, the market value for a house is not what a buyer is willing to pay for it. The value is based on an appraisal which considers the comparable sales in the area. If you pay $1.5M for a house and the appraisal comes in at $1M – you overpaid 2/

Nobody cares if you feel the house is worth $1.5M. Your mortgage assumes the house is worth $1M and you have to come up with the $500K difference. If more and more buyers follow your inflated price, market values start to move up, if they don’t your sale is an outlier 3/

Similarly, in a declining market the market value for a house is based on what comparable homes have recently sold for. If one single desperate seller sells their home for 10% below other comparable sales, that one sale does not change the market value for every other house 4/

It starts as an outlier. If more and more sellers get desperate and also sell for less than previous comparable sales, then of course market values move down. But if they don’t then that one sale that sold for 10% less that market value remains an outlier. 5/

In short one transaction does not make the market - you need many buyers to overpay to push prices up and similarly you need many sellers to sell below market to push prices down /