It's no secret that California's red-hot real estate market has cooled considerably over the past few years. With property values and home prices on the decline and bank foreclosures at an all-time high, local Realtors and their clients have been forced to change the way they approach a deal.

Currently there are approximately 3,000 homes for sale in East County, nearly 43 percent of which are bank-owned foreclosures, according to local Realtor Brian Sharp. The increase in foreclosures is due to adjustable loans adjusting upward and balloon payments coming due around the same time that home values are declining to less than the buyer paid for it.

Despite the tough housing market - or perhaps because of it - savvy investors and some local Realtors say they are keeping plenty busy.

"For me, work continues to be phenomenal," said Joy Di Ricco, a Realtor for Prudential California Realty in Antioch. "Yes, it is a crazy market right now, and so the one thing you really need to stress is how to help. Half the properties are in foreclosure and people's loans are upside down, so my job is to find a way to help them."

One way Di Ricco ameliorates this imbalance is by negotiating "short-sales" for her clients, working with the bank to forgive a portion of the loan so that her clients can sell their property and get out from under their debt.

"It's a cyclical market, and what goes up is going to come down," said Wes Olson of Keller Williams in Discovery Bay. "The market is tricky and we are definitely being affected, but there is still a lot of money to be made for investors. The market is going to stay this way for the next year or two, but it will turn around. And for a lot of people there couldn't be a better time to move up."

Mike Ybarra is one homeowner who agrees. He and his family recently moved from Brentwood to a larger, more upscale home in Discovery Bay. And while it took the Ybarras longer than they thought it would to sell their home and at a significantly lower price than they would have gotten a few years ago, they were able to buy a larger home in a country club setting for a fraction of the price.

"We were very lucky to sell in this market," said Ybarra. "It took a lot of work, and it was a compromise on the price; but while we sold low, we also bought low. For us it really

worked out well."

Mark Christopulus of M&H Realty in Brentwood also has managed to stay busy during the downturn, thanks in part to his expertise in dealing with foreclosures.

"What's hurting the market right now is that banks are taking foreclosures and selling them for under market value because they want to move them," he said. "What I've been doing in this market is taking on foreclosures from the bank and taking the listing and trying to sell them.

"Of course, it's a strong buyer's market right now. But I think cities like Brentwood and Oakley are doing a good job of encouraging commercial business to come to town, so when the market does turn, more and more people will be moving out here again."

Bryce Ellsworth of Windermere, Ellsworth and Associates in Brentwood, said his business continues to be brisk.

"Nothing has really changed for us," he said. "My business is always what's best for the client. Historically the cycle turns every two to five years, and I think we're right in the middle of the cycle."

Ellsworth added that he believes what the federal government does with interest rates in the next year or so will have much to do with the market's recovery.

So what's a homeowner to do? Sit tight if you can, and wait for the market to settle, advised Brian Sharp of Sharp Realty in Brentwood.

"I'm telling clients not to buy right now if they don't have to," he said. "Uncertainty kills the market, and I believe in the last couple of years greed and bad loans have contributed to the decline of the market, and buyers are scared. What I'm seeing a lot of right now are short-sales. Things are definitely slow."

In Brentwood, there are currently 600 homes for sale. Sharp said 20 homes were sold in September, and there are approximately 10 houses pending for October. He said that home prices have shot up faster than incomes were able to keep pace, and thus "everything is out of whack." What people need to be careful of, he added, are those who are painting a rosy picture that currently doesn't exist.

"There is a very small group of unethical behavior out there right now, telling people to buy and sell regardless," said Sharp. "I say: do your job, serve your clients, but have some integrity. That's the bottom line."