ICS Magazine

Housing Market Index Rises Four Points in January

January 21, 2002
The National Association of Home Builders' Housing Market Index (HMI) rises a point above what it was in August, its highest reading since November of 2000.

WASHINGTON -- The National Association of Home Builders' Housing Market Index (HMI) rose four points to 61 in January, a point above what it was in August 2001 and its highest reading since November of 2000.

"This substantial gain, coming on the heels of an eight-point rise in December, indicates that builders' confidence in the single-family market has fully rebounded in the wake of Sept. 11 and the signs of economic weakness that were emerging at that time," said Bruce Smith, NAHB president and a homebuilder from Walnut Creek, Calif.

According to NAHB, the increase indicates that builders are viewing the market for new single-family homes as optimistically as they did prior to the Sept. 11 terrorist attacks. Smith attributed the swift recovery from a 47 reading in October of 2001 to improving consumer confidence, favorable interest rates on home mortgages, and solid investment aspects of homeownership.

He also noted the improvement is a good sign for the overall economy, since housing and related industries account for a substantial portion of the Gross Domestic Product (GDP).

The HMI is derived from a monthly survey of builders that NAHB has been conducting for nearly two decades. Homebuilders are asked to rate current sales of single-family homes and sales expectations for the next six months as "good,' 'fair' or 'poor.' They are also asked to rate traffic of prospective buyers as either 'high to very high," "average" or "low to very low."

Scores for each responses component are used to calculate a seasonally adjusted index, where any number over 50 indicates that more builders view sales conditions as good than poor. In January, the HMI index gauging current single-family home sales and the index gauging sales expectations for the next six months each rose three points from December, to 64 and 67, respectively. The increases were their highest levels since August. The index gauging traffic of prospective buyers rose four points to 50, its highest reading since February of 2000.

The National Association of Home Builders (www.nahb.com is a federation of more than 800 state and local builders associations throughout the United States. The mission of this Washington, D.C.-based trade association is to enhance the climate for housing and the building industry, and to promote policies that will keep housing a national priority. Chief among NAHB's goals is providing and expanding opportunities for all consumers to have safe, decent and affordable housing.