The NAHB/Wells Fargo Housing Market Index (HMI) is a critical indicator of home builder sentiment in the U.S. single-family housing market. Understand its definition, how it works, its impact on the economy, and how it is used by industry professionals.
The NAHB/Wells Fargo Housing Market Index (HMI) is a monthly survey designed to measure the sentiment and confidence of home builders in the U.S. single-family housing market. Published jointly by the National Association of Home Builders (NAHB) and Wells Fargo, this index provides valuable insights into the health of the housing industry and serves as a leading indicator for economic conditions.
The HMI is calculated based on a survey of NAHB members, who are asked to rate market conditions for the sale of new single-family homes at the present time and in the next six months. They also rate the traffic of prospective buyers. Their responses are used to compute a seasonally adjusted figure that ranges from 0 to 100, where higher numbers indicate more positive sentiment among home builders.
NAHB members assess current sales conditions for new homes.
Members predict future market conditions for new home sales.
Builders evaluate the traffic of potential buyers visiting new home sites.
The HMI is calculated by averaging the scores of the three components mentioned above. For example, if the score for the current sales component is 60, the future sales expectation is 65, and the buyer traffic is 50, the HMI would be:
The readings are seasonally adjusted to account for fluctuations due to seasonal factors and provide a clearer picture of underlying trends.
The HMI is widely used by:
While there are many housing market indicators, such as the S&P/Case-Shiller Home Price Index and the Pending Home Sales Index, the HMI is unique in its focus on builder sentiment rather than sales prices or sales volumes.