Relations between the Obama administration and the Israeli government of Prime Minister Benjamin Netanyahu continue to worsen over Israel's refusal to halt new construction in Jewish settlements.

But as the Obama administration continues to press for a freeze to all new units, real estate agents are reporting a rush to buy apartments both in east Jerusalem and the West Bank.

Real Estate Boom

Israel's recent settlement activity reminds some observers of the old joke about traffic lights. A young boy is asked if he knows what the lights mean, and after considering his parents' driving habits, he says he does: Red means stop, green means go, and yellow means go really fast.

In Maale Adumim, a modern, pristine settlement in the hills east of Jerusalem, developers have seen the yellow light of U.S. pressure and are responding with a mini-rush on apartments.

The sounds of construction ring out across the red rock hills of the West Bank. They can be heard in the Bedouin camps in the valleys below, where Palestinians fear the ever-increasing settler population will soon squeeze them out.

In Maale Adumim, in a trailer with a faux log-cabin front, Beth Gordon wraps up a discussion with a real estate agent about the possible purchase of real estate for her children, who still live in the United States. Gordon has lived in Maale Adumim for three years. The clean streets, good schools and gorgeous scenery still enchant her.

"What people call 'settlements' can be a little deceiving. Because I ask people in the States, 'What do you think a settlement is?' And they say, 'I picture a caravan on a hill.' And I say, 'You have to come to Maale Adumim and visit us!' " she says with a laugh.

Higher Prices Aren't Deterrent

Real estate agent Ayalon Cohen says he is selling six to 10 units a month, comparable to the fastest-growing towns in Israel. Talk of a settlement freeze, it seems, is good for business.

"There's a lot of demand. A young couple that wants to buy in Jerusalem cannot afford to do so," Cohen says.

Before Obama's statements, a three-bedroom apartment in Maale Adumim sold for $215,000. Now, the price has jumped to $244,000.

Even with the price increase brought on by the uncertainty over future settlement construction, both the cost of buying and the cost of living are lower here than in many Israeli cities.

Netanyahu is fond of defending "natural growth" in the settlements - that is, growing families needing more living space. But official Israeli statistics show that 4 in every 10 people who move into a settlement do so for economic, not family, reasons.

Families Rooted In the Settlements

Anti-settlement activists have argued that settlement expansion is a systematic attempt to make a two-state solution for Israelis and Palestinians unworkable, and they say there is nothing natural about settlement growth.

But the reality is more complicated. The early fears of those opposed to settlements - and the hopes of settlement supporters - are now being realized: A new generation has grown up calling the settlements home. Some of them may now realize that they grew up in unnaturally privileged surroundings thanks to government subsidies and the constant presence of the army, but that is all they've ever known - why shouldn't they want to live near their families?

Maya, 30, and her husband, Shakha, recently moved with their three children into a shiny new four-bedroom apartment. Maya says having grown up in Maale Adumim, it was always their first choice when it came time to find their own place. Of course, she doesn't mind the economic advantages.

"I would never have been able to find a house like this in Jerusalem. We've had a lot of friends who've moved here, and of course the price is very significant," she says.

Issue May Cause Obama Backlash

Mayor Benny Kashriel is a friendly, aggressive defender of Maale Adumim's right to expand. He says the last 450 units that have prior government approval are under construction and will soon be occupied, with no immediate plans for further expansion. He says Obama's pressure tactics will bring a backlash from settlers in the West Bank, for which he prefers the Biblical names Judea and Samaria.

"And now 280,000 people in Judea and Samaria will be together against him, will demonstrate together, and will not let our government compromise with him," he says.

Palestinians hope Obama will be able to rein in the settlers. They see the West Bank and east Jerusalem, captured by Israel in the 1967 war, as territory for their future state. But so far, they say, they haven't seen anything that gives them real confidence that Obama's pressure will halt the settlement expansion.