Housing Market Index (HMI) Declines in September Following Hurricanes

The National Association of Home Builders (NAHB) said Monday the Housing Market Index (HMI) fell slightly to 64 in September, down from a revised 67. The initial August reading was 68 and the two devastating hurricanes in Texas and Florida impacted this month’s report, matching July for the lowest reading this year.

Still, prior to September, home builder confidence has been unusually strong. Housing starts and building permits have not yet reflected that optimism is monthly surveys. That report is due out on Tuesday and is likely to paint a mixed picture due to hurricane impacts.

Worth noting, buyer traffic remained under 50, down 1 to 47 as first-time buyers are staying out of the new home market by increased prices and tight inventory. Six-month sales are down 4 points to 73 and current sales also down 4 points to 70.

The Housing Market Index (HMI) is based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. The survey asks respondents to rate market conditions for the sale of new homes at the present time and in the next six months as well as the traffic of prospective buyers of new homes.

The HMI is a weighted average of separate diffusion indices for these three key single-family series. The first two series are rated on a scale of Good, Fair and Poor and the last is rated on a scale of High/Very High, Average, and Low/Very Low. A diffusion index is calculated for each series by applying the formula “(Good-Poor+100)/2” to the present and future sales series and “(High/Very High – Low/Very Low + 100)/2” to the traffic series. Each resulting index is then seasonally adjusted and weighted to produce the HMI.

Based on this calculation, the HMI can range between 0 and 100.