"they" is too close to "large investors", and "they" parallels the subject, depressed property values, in the previous clause. Also note, pronoun ambiguity alone is not enough to dismiss an answer.

Adi_Pat wrote:OG12 question...

While depressed property values can hurt some large investors, they are potentially devastating for homeowners,whose equity...

this is the correct version in the OG...the reason provided is that "they" correctly refers to property values...and whose correctly refers to homeowners...

Why couldnt "they" refer to the large investors..making this an ambiguous pronoun..???

Best way to clear a pronoun ambiguity doubt is to replace the pronoun with the nouns it seems to refer to and see if ONLY 1 makes sense - in which case, the pronoun is only referring to that and does not need to be eliminated.

In this sentence, property values are....they are potentially devastating for homeowners
OR

investors ....they are potentially devastating for homeowners

why would the investors be devastating for homeowners???

Hence, they = property values. So its fine!

Hope this helps!