Examining the NAHB/Wells Fargo Housing Market Index (HMI)
The NAHB/Wells Fargo Housing Market Index (HMI) has gained increasing prominence over the past few years. Today, Wall Street firms, the Federal Reserve and other government officials, and various economic analysts, as well as the news media look to the HMI to provide insight as to the health and probable course of the housing market. In this study, we examine the HMI and its ability to predict housing variables.
The HMI is based on a survey that has been mailed to a panel of NAHB builder members every month since January 1985. The survey asks builders to rate housing market conditions based on their experiences. About 400 responses are obtained each month. Builders, with their experience and close contact with local market conditions, provide timely information about current housing market conditions as well as how home sales are likely to behave in the future.
The Housing Market Index (HMI) is a weighted average of responses to survey questions asking builders to rate three aspects of their local market conditions: current sales of single-family detached new homes, expected sales of single-family detached new homes over the next 6 months, and traffic of prospective buyers in new homes.