Housing values in Newcastle and Lake Macquarie have experienced their biggest monthly fall since May 2004.
New CoreLogic figures revealed a 1.8 per cent drop in the month to August, marking a 2.5 per cent decline across the quarter.
However, housing values across the year remain up by 13.2 per cent, and the median house value is $892,000.
Nine months on from the peak of the cycle in November, agents continue to report good prices despite slower sale times and a decreasing buyer pool.
McGrath Newcastle City's Tammy Hawkins said the changing market conditions had given buyers more flexibility.
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"Generally they have a little bit more time to make decisions without it being so rushed," Ms Hawkins said.
"The consensus is that it could be taking another week or two for [properties] to be selling ... it's just a matter of working with people in terms of their conditions a little bit more this year.
"We're finding there's buyers that may not be in a position to move straight away."
Movable's Jason Maxwell said buyer enquiry on individual properties had dropped from between 20-25 per week to less than a handful.
He said sales above the guide price were also becoming less commonplace.
"If [properties] are listed in a price range, if they're going to sell at the top end they're going to sell in the first week or two," he said.
"If they're not going to sell in the first week or two it's going to be in the middle or bottom of that price range."
While housing prices are expected to continue declining, unit prices in Newcastle and Lake Macquarie have so far remained steady.
Values fell just 0.1 per cent across the quarter, rising 0.2 per cent a month, as the median value hit $678,000.
CoreLogic's Tim Lawless said comparative affordability and supply numbers were helping to insulate the unit market from price falls.
"It makes sense that demand will probably be a little bit more insulated across those lower price points, particularly in the medium to high density sector," he said.
"We haven't seen very much newly constructed supply coming into the medium to high density sector - most of the response to [the HomeBuilder initiative] has been in detached housing being built.
"I think we're probably now approaching a situation where that's needed and the high density sector is going to be under-supplied and that will help to support the housing prices."
Housing prices in the Hunter Valley fell 1 per cent in the month to August, and have flatlined in the quarter despite 24.5 per cent annual growth.
Unit prices grew 0.7 per cent across the month, and 17.1 per cent for the year.
The region's median house and unit prices are $724,000 and $515,000 respectively.
