I'm a little frustrated by some of my concepts and I need your help in telling me why my reasoning is "wrong" for the following question:

While depressed property values can hurt some large investors, they are potentially devastating for homeowners, whose equity --in many cases representing a life's savings--can plunge or even disappear.

(A) they are potentially devastating for homeowners, whose
(B) they can potentially devastate homeoners in that their
(C) for homeowners they are potentially devastating, because their
(D) for homeowners, it is potentially devastating in that their
(E) it can potentially devastate homeoners, whose

Here is how I approached the problem:

1. I noticed the subject in the sentence is "values" and therefore they 'might' work. This eliminates D and E because "it" is singular. Fine.

2. I then noticed "whose" and from the SC manhattan book, I recall that the terms, this, that, those and whose merely replicate the antecedent and that "whose" normally refers to people. I then eliminated A. OA is "A" by the way.

3. I always assumed that "they" is for people since its a neutral gender so I eliminated B and picked C.

Another way I picked "C" is because the "they" now refers to the homeowners. And for me...they refers to people.

I'm confused with why they, a plural object refers to nouns like "values" whereas we can use it interchangeably use it for people.

What about the "whose" at the end...isn't that only for people? Why is it referring to the values?

What the heck am I doing wrong here?