Well, the Federal Reserve’s beige book is reporting that economic growth is generally weak, though better than the last one two months ago, but James Bullard, President of the Federal Reserve Bank of St. Louis is saying that inflation is their primary worry right now, joining Bernanke and Federal Reserve Bank of New York president Timothy Geithner.

Canada is concerned about inflation too, with their central bank holding rates steady instead of lowering rates, as was expected, which pushed the Canadian dollar up.

I think that it’s likely that we will see inflation concerns in Japan driving central bank policy there too, as they just raised their 1Q GDP estimate to 4%, which is high enough to raise inflation concerns.

This would imply interest rates going up in the relatively new future, which would undoubtedly force another dip in house prices.

Of course, the resets coming in option ARMs may do this before rates get raised:

This is a scary picture.

There is some not bad news in real estate, Mortgage applications rose 10.9% last week, though one wonders how much of this is driven by bargain hunters REOs^*, which was what drove the recent increase in existing housing sales.

More generally, the lack of confidence is not limited to real estate, as evidenced by the concerns that the LIBOR^† is still not trusted, and that the proposed changes to it are largely viewed as inadequate.

In brighter news, rates are falling onauction rate securities, those financial instruments that were supposed to be as good as a cash account, but have locked up investor money.

This implies that some confidence in the auctions is returning to the market, and as a result, governments are redeeming fewer of the bonds, about $2 billion a week, down from over $5 billion/week for the past few months.

Still, we have problems in energy, with oil prices up over $5/bbl, and gasoline hitting a new record, $4.052/gallon.

^*Real Estate Owned. Property which is in the possession of a lender as a result of foreclosure or forfeiture.
^†London interbank offered rate, a critical measure used to do things like set credit card rates and mortgage rates adjustments.