(CBS) Weld County, Colorado, was one of the hottest housing markets in the country...until two years ago.

"At the very best, we're flat," real estate agent Matthew Revitte tells CBS News correspondent Sharon Alfonsi. "And we could be perhaps contracting."

Revitte sold many homes before oversupply and rising interest rates torpedoed the market.

"We've yet to hit bottom," he tells CBS News.

Homebuyers with adjustable rate mortgages faced payments they couldn't afford. Those forced to sell couldn't find buyers and hundreds defaulted on their loans. Now the place leads the nation in foreclosures – 1 in every 168 households. That's 700 percent higher than the national average.

"Almost overnight it's like somebody turned the lights off," Revitte tells Alfonsi. "Now we are going through the great correction."

According to a new report, they're not alone. Nationwide, more than 300,000 properties entered foreclosure during the 3rd quarter — up 43 percent from a year ago.

"Somewhere between 1.2 and 1.3 million properties will end up in some state of foreclosure over the course of 2006," says Rick Sharga of RealtyTrac, a properties listing company.

Things are so bad in Colorado that the state just set up a first-of-its-kind foreclosure help hotline. It got 1,400 calls on the first day.

"There's north of a trillion dollars in adjustable rate mortgages that are going to reset over the next 15 months," says Sharga. "And what that means for the average homeowner is an increase of between 20 and 50 percent of their monthly mortgage bill."

That's expected to sink thousands of homeowners who bought into the boom with no down payment and risky financing like interest-only loans.

Margaret Hernandez lived in Weld County for five years. Recently, she returned for the first time since she foreclosed in April.

"I can hear my kids," she recalls as she breaks down crying. "I can hear my kids talking and just hearing them playing and talking and eating and everything else...it's hard."

While the emotional toll of foreclosure is personal, the financial impact is shared. You can expect your home value to drop $10,000 or more if a neighbor defaults.

"I don't think the circumstances here in Weld County are that unique to what perhaps could happen in the rest of the country," says Revitte.

Experts CBS News spoke to agree: predicting foreclosures will climb through – at least – the end of next year, forcing many more people like Margaret Hernandez to start over again.

"I really tried hard to keep it and I think will take an eternity to own again but I'm gonna work hard at it – the Lord has to bless me some how again," says Hernandez.

Colorado, Nevada and Florida now have the highest foreclosure rates, while the number of foreclosures in California have tripled since the last year.