The NAHB/Wells Fargo Housing Market Index (HMI) recorded a marginal decline in February 2022, pointing to a roughly stable housing market, per preliminary data released on Feb. 16, 2022. The preliminary national HMI for February was 82. After hitting a 12-month low of 75 in August 2021, the HMI rebounded to 83 in November, 84 in December, and 83 in January 2022. Since the housing sector is a significant factor in overall U.S. economic activity, the HMI is widely used as a key economic indicator.
The HMI results from a monthly survey of National Association of Home Builders (NAHB) members. The NAHB states that the HMI "is designed to take the pulse of the single-family housing market." Respondents rate current market conditions for the sale of new homes, forecast these conditions over the next six months, and assess the amount of traffic from prospective buyers of new homes.
- The NAHB/Wells Fargo Housing Market Index (HMI) was roughly stable in February 2022.
- The preliminary February figure of 82 was down marginally from 83 in January.
- The HMI is a predictor of housing starts during the next six months.
- Housing starts, in turn, are a key economic indicator.
The NAHB/Wells Fargo HMI is a weighted average of three separate component indices: Present Single-Family Sales, Single-Family Sales for the Next Six Months, and Traffic of Prospective Buyers.
The Present Single-Family Sales index had a preliminary value of 90 in February. This matched its high during the prior 12 months, reached in both February and December 2021.
The Single-Family Sales for the Next Six Months index had a preliminary value of 80 in February. This, however, was near its low for the prior 12 months, which was set in June 2021 at a value of 79. The figure for January 2022 was 82, and the last three months of 2021 were at 84 to 85.
The Traffic of Prospective Buyers index had a preliminary value of 65 in February. This was down from 69 in January and a range of 69 to 71 during the final two months of 2021.
In addition to the national figure cited above, the HMI also is computed for four regions: Northeast, Midwest, South, and West.
Comparing the preliminary February 2022 figures to the revised January 2022 numbers, there was strengthening in the Northeast (78 vs. 71) and the West (91 vs. 89), but weakening in the Midwest (71 vs. 72) and the South (84 vs. 86).
Comparing the preliminary February 2022 figures to three-month moving averages, there also was increased strength in the Northeast (78 vs. 76) and the West (91 vs. 89), but weakening in the Midwest (71 vs. 73) and the South (84 vs. 86).
Each month, a panel of NAHB member builders rates the first two components (Present Single-Family Sales and Single-Family Sales for the Next Six Months) on a scale of "good," "fair," or "poor."
The panel rates the last component (Traffic of Prospective Buyers) on a scale of "high to very high," "average," or "low to very low."
An index is calculated for each series by applying the formula "(good – poor + 100)/2" or, for Traffic, "(high/very high – low/very low + 100)/2."
Each resulting index is first seasonally adjusted, then weighted to produce the HMI. The weights are .5920 for Present Sales, .1358 for Sales for the Next Six Months, and .2722 for Traffic. The weights were chosen to maximize the correlation with housing starts during the following six months.