Reality Check Needed on Luxury Home Values

I can not comprehend the current asking prices of a couple of luxury homes in our market.

Here is the background, tell me if it makes any sense to you:

1. Luxury neighborhood in a nice area about 10 minutes West of Ann Arbor.

2. Asking prices for existing homes in the neighborhood are from about $600K to $1.3M.

3. There is a builder that is now offering new construction homes in the subdivision in the $400K range.

4. Ann Arbor home prices in general have dropped about 15% in the last two years with luxury homes hit worse than commodity homes.

5. Right now there is more than three years of inventory of homes like the subject homes.

Here is the issue:

There are two different homes in the neighborhood where the sellers have decided that their homes have gone up in value 20% to 30% from their purchase prices two years ago. Nothing other than maintenance done to othe homes. No comparables that can remotely justify this. The listing agents just say they think the homes are worth it. (I wouldn't expect them to admit a problem with the value to me as a buyer's agent.)

Am I losing my mind here?