The San Francisco Chronicle reports from California. "As of September 2006, Novato had experienced substantial price declines and plummeting sales volumes. But since it currently only has about two months of inventory, perhaps prices will stabilize."

"The stabilizing influence of limited inventory isn't present in all parts of the Bay Area however. In Napa County, for instance, inventory is running much higher with some areas showing a whopping 10 months worth. Last month, the county posted a 8.7 percent decline in the median price."

"The 94065 ZIP code, which has newer developments of townhouses, condos and a more homogeneous housing stock has seen median prices fall 14.0 percent. Why would this neighborhood be harder hit than others? As developers continue to sweeten the pot for buyers, no doubt other developer neighborhoods will tend to be affected by these declines."

"As Tim Earley, agent in Redwood City put it, 'it's hard to put a finger on it; some houses are selling with multiple offers and others need a lot of price reductions and even that isn't doing it.'"

"He recently saw two four-bedroom homes, both fixers within three blocks of one another in the same prized school district on nice streets that received two completely different reactions. One got three offers and sold for more than $100,000 over the asking price. The other attracted no buyers initially until one came in significantly below asking price."

"Earley said nearly 30 percent of the active listings in Redwood City have had price reductions. According to Alexander Clark, founder of a customized newsletter service for real estate professionals, the market probably hardest hit by the new housing paradigm is the cookie cutter lofts in SOMA. 'Not the new loft developments but the ones that are all alike and a little older are selling the slowest,' he says."

"'It's street by street and property by property,' he says. 'It used to be that anything would sell, now if a house is on a busy street or there's something odd about it, it may not have any buyers.'"

"At a real estate conference Monday in San Francisco, a UC-Berkeley expert predicted median home prices in the Bay Area will fall up to 15 percent in the next three years. 'They should buy a house to live in it, and be sure they can afford the payments,' advised Kenneth T. Rosen, of the University of California-Berkeley. 'We're a third or half way through already, depending on the sub-market,' he said."

"San Jose homeowner Michael Park and his wife wanted to move from their smallish three-bedroom, one-bath house near Santana Row into a bigger house on a big lot. 'I just felt like the real estate market was so overvalued and sellers' expectations were so out of whack. The last few months I felt like the market was settling down,' he said."

"The one they made an offer on, which has five bedrooms and a 12,600-square-foot lot, had been listed earlier this year for $1.15 million. When it didn't sell, the owners took it off the market, made a few upgrades and then listed it again for $1,048,000, Park said. He offered less, and the sellers accepted without making a counter-offer."

"Kathi Hammill, an agent in Los Gatos, said house-hunters in Silicon Valley right now are being extremely choosy. 'Yes, there are deals out there, but a lot of buyers don't want those less-than-perfect properties,' she said."

"In general, she said, 'Buyers don't want to buy in a buyer's market, buyers want to buy in a seller's market, they like the comfort of it,' she said. 'If I'm the only one, there's this fear that it might not be the right thing to do.'"

"Investor Susan Bredehoft, an East Bay homeowner, is among those who aren't touching California real estate right now. 'It doesn't fit into my game plan because the properties are so expensive that you can't get cash flow,' she said."

"Bredehoft, who owns 17 investment properties in California, Arizona, New Mexico, Oregon and North Carolina, said she is planning to invest in rental property again next spring. But not in California, where properties are often so costly that rental income from them isn't enough to cover mortgage and other expenses, she said."

"'What they're worried about is, will prices decline further, so if they buy now, could they get a better bargain later?' said Delores Conway, at the University of Southern California. 'No one can predict that.'"

"Two things could cause a more serious correction than the mild one she sees happening. One is if large numbers of homeowners with adjustable-rate mortgages find themselves unable to afford their payments when their loans 'reset,' which could send inventories of for-sale homes soaring. The other is if there's a sudden slowdown in the economy that results in big job losses."