Meanwhile, KB is seeing labor constraints, higher land prices and rising costs for everything from framing to concrete. In short, the Bay Area seems particularly stretched.
"A national rate hike because of strength in California would be a mistake, but it is a mistake that several of the Fed presidents seem eager to make," Cramer said.
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Cramer hoped that a thoughtful Fed member would listen to the entire conference call for KB Homes and realize there is softness in other parts of the country, such as Houston, where sales are down 20 percent because of the plummet in oil prices.
He feared that KB Home could become the poster child for wanting to raise interest rates in order to cool off California's overheating economy before it affects the rest of the country's economy.
Cramer thinks that given KB Homes' unique land bank in one of the most heavily constrained areas of California, it could be a logical takeover target for any of the larger homebuilders.
So, while investors may want to own KB Home to reap the benefits of higher earnings and a possible takeover bid. But on the other hand, the Fed could crush that opportunity with three rate hikes before December.
"With this inconsistent Federal Reserve, all I can say is that this one is too close to call," Cramer said.