This is what the President had to say after the Israeli announcement that 900 apartment units would be built in the South Jerusalem neighborhood of Gilo:
I think that additional settlement building does not contribute to Israel's security. I think it makes it harder for them to make peace with their neighbors. I think it embitters the Palestinians in a way that could end up being very dangerous.
Two issues. The first is that this Administration, unlike previous Administrations, doesn't seem to understand that all settlements are not created equal. Palestinian negotiators have fairly consistently recognized that Gilo, a Jerusalem suburb built over the 1967 Green Line, but south, not east, of the city, would remain inside Israel in a final-status peace deal, as part of a dunam-for-dunam land-swap with the Palestinian Authority. So it doesn't matter if Israel adds 900 apartments, or 90 shopping malls, to Gilo. It's staying inside Israel.
The second issue is the more consequential one: Having made Gilo an issue when it did not previously exist as an issue (as a matter of fact, Gilo, during the second Uprising, stood for Israeli resilience in the face of Palestinian violence) Obama then warned that Gilo is making Palestinians embittered "in a way that could end up being very dangerous." This is euphemistic, of course, but not too euphemistic, given the history of Palestinian violence. Obama's statement reads almost as a kind of preemptive rationalization for violent Palestinian protest. It's never a good idea, of course, for an American president to forecast Palestinian violence, but it's especially unfortunate now, just when Israel had announced a moratorium on new settlement building. In fact, if the Obama Administration hadn't made such a hash of the peace process, the Palestinians would now be returning to the negotiating table, acknowledging that the Netanyahu settlement moratorium is, as Hillary Clinton said, unprecedented. But since the moratorium didn't meet the maximalist conditions set by the Administration, there's no possible way the Palestinians could have been seen demanding less of the Israelis than Obama did.