If Silicon Valley real estate were the heartbeat of the nation’s residential realty markets, then the national pulse might be seen as faltering.

Prices are falling in the California high-tech redoubt. Buyers are more reluctant to open their checkbooks. Anxious sellers fear the market has passed its peak. And mortgage brokers say the purchase rate has fallen.

With an average home price of $500,000, Silicon Valley is still one of the hottest and highest-priced markets in the country. And if this area is experiencing problems, observers say, markets nationwide may be feeling some pain.

“We are definitely seeing a softening in the high end — meaning, $2 million and $3 million homes coming on to the market, not selling right away, and relisting at a lower price,” said Brendon Riordan, vice president of Online Capital Residential Mortgages of Los Gatos.

Moreover, local mortgage brokers say that the economic downturn, which has already affected luxury sales, is now slowing down the middle part of the housing market. Brokers were hoping to contain the erosion to the high end, Mr. Riordan said, where many luxury homebuyers had been driving up prices by drawing on wealth from high-tech stock options — but this hope is beginning to fade.

“Last year real estate values really increased about 20% in Santa Clara County,” said Mr. Riordan, whose parent company, RMR Financial, funds $80 million to $100 million of mortgages a month. “Based on what we see shaping up, it would not be surprising to see values come down perhaps as much as 20% or 30% over the next two years.”

Many blame the dot-coms for the housing market’s current plight, saying that frenzied bidding battles inflated real estate values, skewing a market that is only now regaining its balance.

“If there is a fault to this, they are to blame,” said Doug Jones, executive officer for Mortgage Magic of San Jose. He explained that dot-com millionaires, flush with stock options, did not hesitate to bid $3 million on a home appraised at $1.8 million.

“We are talking about a small group that affected this valley in a big way,” he said. “It caused a lot of problems because most of us here are still working people.”

Chris Larsen, chief executive officer of E-Loan in Dublin, Calif., said three factors are working simultaneously in the market: home prices, average incomes, and mortgage rates. He said prices and incomes had skyrocketed while mortgage rates dropped, which initially did not affect home prices.

“But that can only go so far,” he said. “Incomes are leveling off now and going down — that’s a pretty good indicator that in some areas, things have gotten moderate.”

“In the next six months it will come down about 10% but then go back up,” predicted Mr. Jones.

With rates at or near two-year lows, the refinancing market is booming. This, however, may mask erosion in the purchase market.

For example, Mortgage Magic reported last week that only two of the 47 loans it is processing are to fund purchases.

Though rates are not as low as in 1998, Mr. Jones said, people are refinancing because they have a lot of equity in their houses and are concerned that they could be laid off.

Many brokers said that, despite a decline in purchases, they are backlogged with refinancings. “Because of the refis, it is harder to get things through the system,” said Bill Totton, a loan officer at Amerimac Calwest First Inner City Mortgage in San Jose. “Our system can only handle so many loans on a given day, and it’s reaching capacity because the refi boom is so high.”

The economy’s decline is also affecting the rental market, causing people to rent longer before buying a home.

“People may choose to rent a little longer before jumping into the market,” said Mr. Totton. “They are perceiving there is a little softening, then may want to wait and grab a house later.”

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