Jump in Foreclosures Dims Obama's 'Glimmers of Hope' for Economy

Just two days after Federal Reserve Chairman Ben Bernanke mentioned housing data as one sign of hope that economic recovery may be beginning and President Barack Obama agreed that there are "glimmers of hope," reports on new-home construction and foreclosures have brought more cause for pessimism.

Analysts had expected that the numbers would be better, particularly since a report released a month ago showed a sharp uptick in construction of new homes. In a speech on Tuesday, Bernanke pointed to that, along with an increase in home sales, as encouraging signs for the economy. "The housing market remains depressed, but lower interest rates and house prices are making houses more affordable," he said.

Any gains in the home market, however, seem to have been lost in March. Home construction dropped to the second-lowest level on record—a rate of 510,000 units annually. In February, the rate was 572,000, and economists had expected it to be 540,000 in March. Meanwhile, foreclosures continued to climb. According to research firm RealtyTrac, filings spiked by 17 percent from February to March, making levels 46 percent higher in March than one year ago. For the first quarter of 2009, they increased by 9 percent, with 1 in 159 housing units receiving at least one foreclosure notice.

The housing data weren't the only glum economic news. More signs have arrived that the credit crisis continues, with the Treasury Department reporting yesterday that business lending dropped by 24 percent at 21 banks that have received more than $211 billion from the government. Student, auto, and credit card loans were also down. The only increase was in mortgage lending.

Although the Treasury initially said that increasing lending was a main purpose in aiding the banks, it has since said that it now hopes to limit the decline. Therefore, it asserted that, because the banks would have lent even less without aid, the numbers showed "the critical role this program has played in stabilizing markets and restoring the flow of credit to consumers and business."

• Read The Uncertain Wait for All Those Stimulus Dollars.
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