Luxury home prices in Los Angeles, San Diego and San Francisco all posted modest declines in the first quarter of 2008, as banks pulled back on lending even to high net-worth households, proving that no segment of the housing market can escape the pricing corrections taking place throughout much of the state. According to First Republic Bank, a Merrill Lynch & Co. (MER) unit that provided price estimates in a survey released Monday, the average luxury home in Los Angeles stood at $2.35 million by end of the the first quarter -- off 2.2 percent from fourth quarter's average. San Diego-area luxury homes saw a similar 2.2 percent quarterly slide, falling to an average of $2.06 million, while San Franscisco's luxury market dropped 0.8 percent to $3 million. "Values of luxury homes in California have declined slightly in price after many years of strong appreciation," said Katherine August-deWilde, president and COO at First Republic Bank. Agents said the lower end of the luxury market is weakest because move-up buyers are staying put. "The market is slow until about $4 million, but the moment you hit that threshold, there is consistent, pent-up demand," said Barry Sloane of Sotheby's International Realty in Beverly Hills. "The higher the price, the greater the demand, and the more sales there are. It's extraordinary." In Orange County, Calif., prices for inland properties have fallen, while homes in beach communities have retained their value. Throughout the region, buyers are focused on getting a deal. "Today, it has to be perceived as a bargain," said Gary Legrand, President of Surterre Properties in Newport Beach. "We just had three deals with multiple offers because the properties were considered a good value. When the price is right, buyers are jumping in." In San Francisco's Bay Area, some agents took strong issue with the suggestion that prices were falling -- even by a little bit -- for luxury homes in their area. "I have a hard time reconciling that the market is down in San Francisco," said Val Steele of Sotheby's International Realty in San Francisco. "The luxury market is as strong as ever. Our biggest problem is lack of well-done properties." "We're still seeing multiple offers and homes going over the asking," said Anne King of Keller Williams Realty in Palo Alto. "We just had a $2 million sale that went 10% over and it was only on the market for 11 days. We haven't seen decreases in prices at all. It is still a seller's market in this area." Numbers being what they are, however, prices of luxury homes in the Bay Area have fallen -- even in San Francisco. It seems likely that such price drops aren't exactly music to the ears of sales agents, whose income largely depends on what price a property can sell for; but the problems may be tied to a lack of availability for so-called super-jumbo funding as much as to a needed correction in housing prices state-wide. As the housing and mortgage mess has worn on, liquidity in the mortgage market for loans above the traditional $417,000 conforming limit has all but disappeared; recently-passed legislation, included in the Economic Stimulus Act, boosts conforming limits to as high as $729,500 in certain key areas. But even the boosted loan limits are likely to be of little assistance to luxury home buyers in California's most expensive housing markets, where prices can average well into the millions. Disclosure: The author held no positions in MER when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.