Flattening home price appreciation, slowing home sales and rising interest rates could lead home prices in the Western U.S. to slip, causing a rise in foreclosure activity, according to ForeclosureS.com.The distressed property investment advisory firm and publisher of foreclosure information said that home prices in Phoenix, Ariz., have declined 6.7% over the last six months after several years of rapid increases. The company also said prices have dropped for two consecutive months in the Las Vegas market. California markets, including the San Francisco Bay and San Diego areas, are seeing price appreciation cool down as well, according to Alexis McGee, president of ForeclosureS.com. She noted that in San Diego, 50% of mortgage loans issued between 2003 and 2005 were either interest only or pay-option adjustable-rate loans, which pose a major risk of increasing default rates.

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