Discover the NAHB/Wells Fargo Housing Market Index: Insights into U.S. Home Builder Sentiment

What Is the NAHB/Wells Fargo Housing Market Index (HMI)?

The NAHB/Wells Fargo Housing Market Index (HMI) is an essential monthly survey that gauges the sentiment of home builders across the United States, focusing on single-family housing. Conducted among members of the National Association of Home Builders (NAHB), this index offers a comprehensive look at builder confidence, reflecting current sales conditions, future sales expectations, and the volume of prospective buyers visiting homes.

Why Does the HMI Matter?

Housing plays a vital role in the U.S. economy, influencing not only construction but also consumer spending on appliances, furnishings, and related services. The HMI serves as a leading indicator of the housing market's health, helping investors, policymakers, and businesses anticipate economic trends.

Key Highlights of the HMI

• The HMI is a trusted barometer of builder sentiment in the single-family home sector.
• Builders evaluate current sales, six-month sales outlook, and buyer traffic, providing a holistic market perspective.
• Values above 50 signal a positive market environment, while those below 50 suggest caution.
• The index combines three seasonally adjusted components weighted to best predict housing starts in the coming months.

How Is the HMI Calculated?

The HMI is derived from three core components: current single-family home sales, expected sales over the next six months, and prospective buyer traffic. Builders respond by rating sales as good, fair, or poor, and buyer traffic as high, average, or low. These responses are converted into diffusion indexes using a precise formula, then seasonally adjusted and weighted—approximately 59% for current sales, 14% for future sales, and 27% for buyer traffic—to produce the final HMI score.

The NAHB and Its Role

The National Association of Home Builders represents over 140,000 members nationwide, including home builders, remodelers, and related professionals in mortgage finance and building materials. NAHB members are responsible for nearly 80% of new home construction in the U.S., making their insights highly valuable for assessing market trends.

HMI as a Leading Economic Indicator

The HMI closely correlates with U.S. single-family housing starts, a critical economic indicator that tracks new home construction activity. Released monthly ahead of official housing start data from the U.S. Census Bureau, the HMI provides early signals about the housing market’s direction, enabling stakeholders to make informed decisions.

Historical Context

The HMI has shown significant fluctuations, hitting a record low of 8 in January 2009 during the housing crisis and reaching a peak of 90 in November 2020. Its recovery trajectory often leads housing starts, underscoring its predictive power.

Important Notice

Mortgage lending discrimination is illegal. If you believe you have been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, you can file a complaint with the Consumer Financial Protection Bureau or the U.S. Department of Housing and Urban Development (HUD).

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