The Housing Market Index, also known as the NAHB/Wells Fargo Housing Market Index or the HMI, is a measure of the strength of the national single-family real estate market based on a monthly survey of National Association of Home Builders members. It is represented by a number between 0 and 100. So, a score of more than 50 would mean that more builders believe that the market is good than think it's poor.

The HMI provides insight into the state of the residential construction industry and housing market trends using data on builder sentiment, new home sales, housing inventory levels, and buyer traffic. It is also used by financial analysts, policymakers, the media, and even the Federal Reserve as an indicator of the country’s overall financial health.

What is the National Association of Home Builders?

The National Association of Home Builders (NAHB) is a federation of over 800 builders’ associations across the country. This HMI is released by the NAHB's economics team, with one-third of its members being home builders or remodelers. The other members work in related fields such as real estate, building materials, and housing finance.

What is the HMI Based On?

Unlike other housing market indices, the HMI does not consider home prices. Rather, the HMI is calculated by the NAHB and Wells Fargo based on NAHB member survey responses. 

Each month, a panel of builders will rate certain components of the US housing market. Typically, NAHB receives about 400 responses each month. The survey results will be used to calculate a number ranging from 0 to 100. This number represents the HMI for the month.

In the monthly survey, builders are asked about their level of confidence in various aspects of the residential real estate market. Because builders are directly involved with local market conditions, they can provide accurate and detailed insights into current housing market conditions and informed predictions about future home sales.

The HMI is a weighted average of the builders’ survey responses on three separate components of real estate market trends:

  • Current sales of single-family homes
  • Single-family home sales for the next six months
  • The traffic of prospective buyers

How Is the HMI Calculated?

In the survey, NAHB members are asked to rate each of the three components listed above, Current and future sales are rated “good,” “fair,” or “poor” by the builders. Prospective buyer traffic is rated “high to very high,” “average,” or “low to very low”. 

All of the survey results are compiled and the index is calculated using one of the following formulas:

  • (Number of “good” ratings - number of “poor” ratings +100)/2
  • (Number of “high to very high” ratings -  number of “low to very low” ratings +100)/2

Each index is then seasonally adjusted and weighted to generate the HMI. The indexes are weighted as follows:

  • 0.5920 for the Present Sales
  • 0.1358 for Sales for the Next Six Months
  • 0.2722 for Traffic

The HMI is released at 10 a.m. EST on the day before new housing starts data from the Census Bureau is released. This typically occurs mid-month. 

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