Magical realist fiction

Oxford dictionary of literary terms, via Oxford reference online, Nov. 5, 2012 (magic realism: also magical realism; kind of modern fiction in which fabulous and fantastical events are included in a narrative that otherwise maintains the 'reliable' tone of objective realistic report; associated chiefly with certain leading novelists of Central and South America; term has also been extended to works from very different cultures, designating a tendency of the modern novel to reach beyond the confines of realism and draw upon the energies of fable, folktale and myth while retaining a strong contemporary social relevance)
Britannica online academic edition, Nov. 15, 2012 (magic realism: chiefly Latin-American narrative strategy that is characterized by the matter-of-fact inclusion of fantastic or mythical elements into seemingly realistic fiction)

Modern fiction in which fantastic or mythical elements are included in a narrative that is otherwise realistic.