At the end of 2006 foreclosures were up 42 percent from 2005 according to RealtyTrac. Colorado recorded the highest foreclosure rate in the United States, one for every 376 households. Texas led the nation in the amount of foreclosures with more than 14,000 households entering into some stage of foreclosure. "The combination of slower home sales and rising interest rates on ARMs continues to drive foreclosures at significantly higher numbers than a year ago," said James J. Saccacio, chief executive officer of RealtyTrac. These are not historically high numbers; in fact, the last several years have seen unusually low numbers of foreclosures. However, the rapid increase is worth noting. More foreclosures could ultimately mean difficulty for some borrowers.

Nationwide, existing home sales during 2007 are expected to decrease only 1 percent compared with 2006, according to the National Association of Realtors. However, the rise in foreclosure defaults will cause the prime rate to rise as well. It will become more difficult for a first time homebuyer to get a second mortgage. Rates have already risen and will continue to do so. "What's happening, you're starting to see the impact of higher interest rates," said Keith Leggett, senior economist for the American Bankers Association "As interest rates rose, that ... translated into basically a slowing in the rate of growth in home equity lines and home equity loans." The fact is that many consumers just won’t be able to afford the rate or will not have the equity in their homes.