More grim news for the struggling US economy: The number of foreclosures just keeps on rising. This from The Wall Street Journal:

The number of foreclosed homes owned by lenders continues to rise despite signs that they are increasingly willing to slash prices to sell those properties.

Lenders and investors in mortgages owned about 660,000 foreclosed homes in April, up from 493,000 in January and 231,000 in January 2007, according to First American CoreLogic, a research firm based in Santa Ana, Calif., that collects data from lenders and county clerks. The April total works out to about one in seven previously occupied homes available for sale nationwide.

A surge in defaults has increased the inventory of bank-owned homes, known in the trade as REO, for “real estate owned.” By cutting prices, lenders have managed to increase sales of such homes sharply in recent months in some cities hit hard by foreclosures, including Las Vegas, Detroit and Sacramento, Calif., local real-estate brokers say.

“Teaser rates of just 1% interest, left almost one-in-ten subprime borrowers unable to meet their monthly mortgage bills,” says Adrian Ash in The daily Reckoning UK. “So the profits assumed by ‘resetting’ those rates to 7% and above two years down the line were never going to show up.

“As in not ever. Any bank day-dreaming otherwise deserves euthanasia, let alone bankruptcy.

“What they’re getting instead, however, is a fresh dose of money from the Fed. The US central bank is actively creating a market in mortgage bonds, accepting these illiquid assets as collateral against loans of highly liquid US Treasury bonds.

“Will the money thus released to the banks find its way back into US house prices? Whatever happens on your street in 2008, subprime lending as a financial product is dead – if not for good, then at least for now. Issuance of residential mortgage-backed bonds collapsed by 95% during the first three months of this year, according to data from SIFMA, the securities association. The futures market expects a further 25% drop in US house prices, notes Janet Yellen of the Fed, based off the price for Case-Shiller index contracts.”