Silicon Valley's median home price dropped 6.1 percent in the past two months, the largest such decline in three years, but when it comes to the dollar amount, the $50,000 loss over the two month period was the largest ever.

Granted, percentage-wise, a $50,000 drop from $800,000 is the same as a $25,000 drop from $400,000, but the dollar figures reveals that the higher prices go, the more room that they have to fall.

The median price for single-family home prices came in at $770,000 in August, down $35,000 from July, which reflected a $15,000 drop from June, according to Richard Calhoun, real estate broker with Creekside Realty in San Jose and publisher of the Bay Area Real Estate Market Newsletter.

The report is comprised of statistics from the area's multiple listing service, RE InfoLink of Campbell, CA, and reveals the last time prices fell that far was during a two-month period ending in August 2002 when they were also down 6.1 percent. In the two-month period ending in October 2001, single-family home prices were down by 6.8 percent.

The new median price is only $10,000 more than it was a year ago, representing a 1.3 percent increase in home prices, the smallest year-to-year gain since September 2003, when prices increased only 1.6 percent, according to Calhoun.

"The market is not tanking, but it is reminiscent in many ways to the real estate market of the early 1990's," said Edwin Resuello, president of the Santa Clara County (Silicon Valley) of Realtors.

"We saw a two- to three-year downturn in the housing market, a huge number of foreclosures and a new trend that was labeled 'short sales.' Wouldn't you know it, we have similar characteristics just starting to show now," said Resuello, also broker-owner of Realty World Silicon Valley Homes in San Jose.

Surrounding county markets and a few Silicon Valley sub-markets already reveal year-over-year price declines and that trend is likely to spread further into Silicon Valley, most experts say. The up and then down cycle is normal for the market and it has been too hot for too long during what many considered an unsustainable boom of record proportions.

"Yes, some segments of the market will go down, and these will be properties that are overpriced by sellers still thinking they can get whatever they want for a property. It's like a wildfire that has been out of control for a couple of years, but that has finally been brought back to just a steadily burning flame. Sellers have either got to get smarter and less greedy or they will be stuck with these overpriced properties for months. The day of insane overbidding is over," said Linda Boyd, a broker associate with Meredith Homes & Enterprises, Inc. in Los Gatos.

In August, home buyers were paying, on average, only 99.4 percent of single-family home sellers' asking price, compared to 100.3 percent a year ago. Single family-homes were taking an average 42 days to sell, compared to 29 days in August 2005, Calhoun reported.

The relatively more affordable condo market fared a little better.

After the median condo price rose $2,500 in July it lost an equal amount in August, settling back in at $510,000, 3 percent more than the August 2005 median.

Condo sellers were getting an average 99.7 percent of their asking price, down from 102.5 percent a year ago. The higher density homes were selling in an average 41 days this August, compared to 20 days a year ago.

Silicon Valley's South County area -- Gilroy, Morgan Hill and San Martin -- reveled a year-over-year price decline from a median $605,000 last August to $599,900 this year.

Neighboring counties, San Mateo County (down 4.5 percent) to the north and San Benito (down 0.84 percent) and Santa Cruz (down 2.3 percent) counties to the south, also experienced year-over-year price declines.

Rob McCarthy, owner and a senior mortgage planner at The Honte Group mortgage brokerage in Campbell remains bullish on select areas.

"In Willow Glen, Los Gatos, Cupertino, Los Altos and Palo Alto, for the last 10 months, many of my clients have had to pay over list to get their offer excepted. On refis, those values, per my appraiser, have also gone up by about 5 percent. Is the market tanking? Definitely, no. Flattening? Yes," McCarthy said.

Over-list price purchases, however, could be dangerous at a time when the market, in general, is not the boom town it once was.

Home buyers in the market now certainly can enjoy a better negotiating position, but they should not expect fast gains and they should plan on staying in the home long enough for a return to at least offset buying and selling costs.

"Buyers are going to have more choices, but they too have a learning curve to go through. I heard a speaker at a broker's tour breakfast sum it up perfectly: 'Sellers want last year's prices and buyers want next year's prices,'" Boyd said.

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