Dragons could have been real
Out of all the things that currently exist on this planet right now, dragons would be mundane. Narwhals are aquatic unicorns, leeches are ??? that sucker themselves on/into your flesh and drink your blood, and the idea that "all dinosaurs went extinct" is a little bogus when you know that many species of animals alive today existed long before dinosaurs or alongside them and what even is the definition of a "dinosaur" anyway?
Dragons appear in every region's folklore someway, somehow. Asia, Europe, Africa, the Americas, Oceania and the Pacific Islands all have some folk tale about at least one dragon, regardless of how their appearance and supposed power(s) may change in each version.
A winged lizard that breathes fire or some other "burning" substance is not at all difficult to imagine, especially if one takes into account the kinds of defense mechanisms reptiles often have: spikes, poison/venom/acid, claws, fangs, etc. Who's to say some poor ancient schmuck didn't attempt to defend some livestock from a strange looking, airborne creature and get doused in a bodily fluid that felt like it burned, inside and/or out, beginning the quest of extinction and habitat destruction long ago?
They could have been dinosaurs of some kind (ommitting the fact that we now know most dinosaurs wouldn't exactly look like vacuum-sealed, seran-wrapped reptiles due to the necessity of flesh, fluids, and fat, making scaled or leathery skin also pretty unlikely for most) and due to their relatively more recent interactions with humans, already been destroyed/consumed in the abuse of fossil fuels.
And while they probably didn't have magical powers, elephants can feel their herd miles away through their feet while bats and dolphins can echolocate, so... I suppose that depends on your definition of "magic".