My New Blog

Here's a thought for our federal interest regulators:  The idea that you can borrow money to buy a home at the same rate in the U.S. market is poor financial lending - stupidity at its best. The one-size-fits-all approach does not work.

Some housing markets need more stimulation than others. The Federal Housing Administration sets limits on loan amounts based on where the home is.  Why not tie interest rates the same way - lower rates in challenged areas; higher rates in none-challenged areas.

Having low rates in a market that doesn't need low rates is like adding fuel to the fire, which only over-stimulates an already strong market. It was low rates in already hot markets that created the over supply and speculators.

So. hey, federal finance regulators, put interest rates into the housing markets on a state, county and city basis. Base them on who needs the stimulus and who doesn't. The one-rate-fits-all method does not work, and it is bad fiscal policy.

Consider rates tied to offset states' and counties' unemployment rates. Consider other factors, such as growth rates, exiting rates. These factors may become the equalizers to the cost of money against the market the buyer finds himself considering. It wouldn't be that hard to do, and it makes sense.

Jeff Hedberg