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Under water. Upside down. Negative equity. No matter the terminology to describe the erosion of home equity in the East Bay, the conclusion is inescapable: A local housing sector that once was remarkable for how high it could soar has plunged into the depths.

About two out of three East Bay homes that were bought since 2005 are now worth less than the mortgages on the houses, according to a Zillow.com study. The research by Zillow, an online real estate service, portrays a

fresh set of woes for a sinking residential real estate market.

Zillow's survey determined that, on average, 59 percent of the houses bought in Alameda County in 2005, 2006, and 2007 now have negative equity. That means the amount of the mortgage exceeded the value of the house. In Contra Costa County, an average of 76 percent of the homes bought during those years now suffer from negative equity.

San Joaquin County and Solano County fared much worse. In San Joaquin, an average of 93 percent of the homes bought in the same three years are worth less than their mortgages. In Solano County, 85 percent of the homes bought during the 2005 through 2007 period are under water.

The housing market in the East Bay and adjacent communities looks much weaker than the nation as a whole. About 52 percent of the U.S. homes bought in 2006 now suf-


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fer from negative equity, Zillow reported.

Potentially, thousands of East Bay homes are under water, based on an analysis by this newspaper that cross-referenced the Zillow data with separate reports from Dataquick, a research firm that tracks the real estate market.

Dataquick estimated that during 2005, 2006 and 2007, about 64,000 homes were sold in Alameda County and 63,000 in Contra Costa. That could mean that nearly 38,000 homes sold in Alameda County from 2005 through 2007 are under water. Nearly 48,000 Contra Costa homes sold during that period might be in the same financial straits.

Even worse, the financial undertow has engulfed a widening group of local residents.

"We're probably a little upside down now," said Jeffrey Vandevoir, who owns a Brentwood home that he and his wife, Sara, bought in 2005. Despite the travails, he is determined to pay the mortgage. "We're going to meet our obligations," Vandevoir said. "We plan to stick it out."

Russell LaClair and his wife, Janet, bought their Livermore home for about $600,000 in 2005, according to Alameda County records. An estimate from Zillow.com suggests homes in the vicinity of the LaClair residence are now worth $522,000.

"I know that our house is not worth what we paid when we bought it," LaClair said about his home. He added, "It is what it is. We made a choice that has left us with a high payment."

One Brentwood resident who bought a home in the Garin Ranch section of Brentwood said he and his wife have ridden a roller coaster of home values. Robert, who asked that his last name not be used, said they have been hammered both by falling home values and rising mortgage payments.

"The first year and a half, the house's value went way up," Robert said. "These days, you know how bad the market is."

In late 2004, Robert and his wife paid $524,500 for the house. Now it's up for sale for $369,000. (A lender for the house, Citibank, has begun foreclosure proceedings on the financially distressed property, county records show).

The drastic slump in property values can depress the outlook of homeowners who have seen their equity sink from view, said Stan Humphries, vice president of data analytics with Zillow. For many U.S. residents, a home is their single largest investment.

"Seeing that investment vanish through negative equity has to be disheartening," Humphries said. "Nationwide, for people who bought at the peak of the market in 2006, more than half are looking at negative equity in their home."

What's more, in recent years, homeowners frequently tapped the equity in their homes to finance one-time purchases. That source of cash has withered during the housing market's collapse.

"Many people have used their homes as a large piggy bank," Humphries said. They have seen appreciation over time. Now the good times are over. It has a big psychological effect to know they don't have that as a recourse any more.

The disclosure that so many homes bought in recent years are under water suggests the deluge of housing problems won't soon ebb.

"This definitely has a ways to go," said Christopher Thornberg, an economist with Beacon Economics. "There is no sense this is anywhere close to being over. This thing is not over by any stretch of the imagination."

More homeowners may turn skeptical about the benefit of monthly loan payments when the owners have little or no chance to harvest a financial upside from the house.

"You have the walk-away issue, where people see the house is under water and they give up," Thornberg said. "People will realize over time that it is ludicrous. They will ask themselves why keep making a mortgage payment."

Other owners could become financially frozen in homes that will likely be worth less than the mortgage for the foreseeable future.

"People are stuck in the house," Thornberg said. "They won't be able to move because they can't take the financial hit."

Yet it might not take that many years for markets to bounce back and produce a better financial picture for homeowners, Zillow's Humphries said.

Zillow estimated that home values in the past year have fallen by nearly 17 percent in Alameda County, 23 percent in Contra Costa County, more than 24 percent in Solano County and almost 34 percent in San Joaquin County.

But during the past decade, home values have risen an average of 8 percent a year in Alameda County, Contra Costa County, and San Joaquin County, and by an average of 9 percent in Solano, Humphries said.

"If homeowners can stick it out, they typically will see positive appreciation" in property values, Humphries said.

Still, that prospect is only the coldest of comfort for more than a few homeowners.

Robert, the Brentwood resident, said he and his wife are devastated about the prospect of losing their home through the looming foreclosure. He recalls how much time they spent fine-tuning amenities for the residence.

"We picked our own tile and other options," Robert said. "We loved that house. It killed us to walk away."

Reach George Avalos at 925-977-8477 or gavalos@bayareanewsgroup.com.