Yuba-Sutter homeowners who bought in the last five years are mostly underwater on their mortgages, says an Internet home value report.

Roughly three quarters of Yuba-Sutter homes purchased in the last five years are worth less than their mortgages, said Zillow.com, an Internet home-value provider.

And the last year has continued to be brutal to area homeowners.

Zillow.com's median home value estimate for the second quarter sagged by 23.4 percent for the Yuba City metropolitan area compared with a year ago. Nationwide estimates dropped 9.9 percent for the same period.

"Obviously, Yuba City isn't doing that wonderful, comparatively," said Zillow spokeswoman Sarah Mann.

The Seattle-based Internet home-value provider released its Real Estate Market Reports on Tuesday for the second quarter of this year. It showed that Yuba-Sutter is in the cellar when it comes to home values along with other California areas.

California was hit hard in the last year, including Yuba-Sutter, which had the 12th highest year-over home drop among 165 U.S. metro areas. Merced was No. 1 with a 46.6 percent drop, and Stockton was No. 2, declining by 38.2 percent.

Zillow's report shows 76.5 percent of Yuba-Sutter home purchases made in the last five years have negative equity. They're underwater on their mortgages.

Nearly nine out of 10 homes would have negative equity if they were purchased in 2005. The area's home value index peaked at $323,359 during the third quarter.

And almost half of the second quarter home transactions, 44.3 percent, involved a foreclosure property, according to Zillow.

But it's a better deal for newcomers to the home market. Someone who bought a home this year is more likely than not to have positive equity, an estimated 52 percent.

"There are great opportunities for people who want to buy houses now," said David Burrow, of Keller Williams Realty Yuba-Sutter and president of the Sutter-Yuba Association of Realtors.

It may be a buyer's home market but people trying to sell have a tough time. Some are deciding to walk away from their homes because they owe more than the home is worth —a median figure of $99,111 for homes purchased in 2006, said Zillow.

"It is not an easy market," said Burrow.

But people should not give up, he said. Instead they should try and work out a deal with their lender such as a short sale or refinancing. That may require help from an attorney, tax advisor or Realtor.

Homeowners should also not put too much stock in one source of information, such as Zillow, said Burrow.

"It's a benchmark, I would say," said Burrow. "But as far as relying on that to make any kind of a financial decision, that's not a wise move."

Zillow said it calculates home values using a weighted average of the median home value for each county. It obtains its information from public records in county recorders offices.

Contact Appeal-Democrat reporte John Dickey at 749-4711 or at jdickey@appealdemocrat.com.