PHILADELPHIA (AP) _ As Mark Kuonen watched demolition crews break apart the sinking homes on his block, it felt as if something fundamental was being torn away.

``My American dream is going down with that house,'' he said.

City and state officials have promised to compensate Kuonen and six other families on Hegerman Street who were ordered from their sinking houses a week ago. The homes, located in a neighborhood flanked by factories and warehouses, were built in the 1920s over old creek beds that were filled with a layer of ash up to 21 feet deep in some places.

Residents complained for years about the shifting buildings. The city buttressed several homes, but determined two months ago that the problem had worsened.

The site was inspected this week to determine whether city sewer work in 1996 hastened erosion there. Mayor Edward G. Rendell said he decided there was enough likelihood that the city might have contributed to the problem ``that I gave the residents the benefit of the doubt.''

He said the families will receive the fair market value of their houses, compensation for the stress of the hasty move and payment for any damage done to their furniture.

``These are our citizens,'' Rendell said. ``They did nothing wrong here. We are going to try to make them whole.''

The agreement brought some relief to grim-faced residents who watched crews with sledgehammers, pry bars and electric saws begin demolishing seven of the homes on Thursday.

``We have a little bit more hope,'' said Dolores Washburn, who along with her husband and son were among the families ordered out.

``There is no experience like it, lying in bed on that first night thinking, `My God, I'm homeless,''' Mrs. Washburn said.

Homeowners near Hegerman Street could face the same fate. City officials are checking cracks in many structures, including the home of Diane McDowell, 45, who lives three doors away.

``They didn't say this property is condemned. We are just waiting for that,'' Mrs. McDowell said. ``Every time someone comes to the door, we jump.''