Key Takeaways
- Monthly survey measuring homebuilder confidence.
- Index above 50 means optimism, below means pessimism.
- Predicts future housing market trends and starts.
- Weighted scores from sales, expectations, and buyer traffic.
What is Housing Market Index?
The Housing Market Index (HMI) is a monthly survey conducted by the National Association of Home Builders in partnership with Wells Fargo that measures builders' confidence in the U.S. single-family housing market. It scores sentiment on a scale from 0 to 100, where values above 50 indicate optimism and below 50 suggest pessimism.
This index serves as a leading indicator of housing market health, helping you anticipate trends in construction activity and overall economic conditions.
Key Characteristics
The HMI captures builder sentiment through a weighted combination of key factors:
- Current sales: Builder ratings of present new single-family home sales, weighted most heavily in the index.
- Sales expectations: Forecasts for the next six months, reflecting future market outlook.
- Buyer traffic: Measures the flow of prospective homebuyers, indicating demand strength.
- Monthly updates: The index is published regularly, providing timely insights into market shifts.
- Correlation with economic indicators: The HMI often aligns with trends in CCI and construction employment.
How It Works
Each month, the NAHB surveys a panel of single-family home builders who rate three components: current sales, sales expectations, and buyer traffic. These categories are scored using a formula that balances favorable and unfavorable responses, producing component scores on a 0–100 scale.
The overall index is a weighted average, with current sales accounting for approximately 59%, buyer traffic 27%, and sales expectations 14%. For example, if a majority rate current sales as "good," the index will reflect increased builder confidence.
Examples and Use Cases
The HMI is widely used by various stakeholders to guide decisions and forecasts:
- Homebuilders and suppliers: Companies like FRT monitor HMI trends to adjust production and inventory levels.
- Investors: Tracking the HMI helps identify opportunities in homebuilder stocks and real estate sectors, complementing analysis of loan-to-value ratios.
- Economists and policymakers: Use HMI data to assess housing affordability and market conditions alongside metrics such as price elasticity of demand.
Important Considerations
While the HMI provides valuable foresight, it reflects sentiment rather than actual sales data, so it's important to consider it alongside concrete housing starts and permits figures. Market conditions like interest rates and material costs can influence builder sentiment and should be factored into your analysis.
Additionally, the index's historical fluctuations show that readings below 50 signal caution, which can impact sectors beyond homebuilding, including suppliers like PLD. Integrating HMI trends with broader economic indicators can enhance your strategic planning.
Final Words
The Housing Market Index offers a timely gauge of builder confidence that often precedes shifts in housing starts and related economic activity. Monitor monthly HMI trends alongside interest rates to anticipate market momentum and adjust your homebuying or investment strategy accordingly.
Frequently Asked Questions
The Housing Market Index (HMI) is a monthly survey conducted by the National Association of Home Builders and Wells Fargo that measures U.S. single-family home builders' confidence in the housing market. It scores builder sentiment on a scale from 0 to 100, where readings above 50 indicate optimism.
The HMI is calculated from builders' ratings on current sales, sales expectations for the next six months, and buyer traffic. Each component is scored on a 0-100 scale, then combined using weighted averages, with current sales having the largest impact.
The HMI provides a leading indicator of the health of the single-family housing market, helping economists, investors, and policymakers anticipate trends before official data like housing starts are released. It also influences related sectors like construction and homebuilder stocks.
An HMI reading above 50 means that most builders are optimistic about the housing market, while a reading below 50 signals pessimism. A score of exactly 50 indicates a neutral or balanced outlook.
The Housing Market Index is published monthly, providing timely insights into home builder sentiment and housing market conditions across the U.S.
After peaking at 84 in early 2022, the HMI has generally stayed below 56 due to high interest rates and costs. For example, in November 2025, the index was 38, showing continued weakness but a slight increase from October.
Economists use the HMI to forecast housing trends, stock traders evaluate it for investment decisions in homebuilder-related stocks, and policymakers assess housing affordability to guide resource allocation.
