Bruce Smith, NAHB president, 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 noted that this improvement is a good sign for the overall economy, since housing and related industries account for a substantial portion of the Gross Domestic Product.
The HMI is derived from a monthly survey of builders that NAHB has been conducting for nearly two decades. Home builders 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 responses to each 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's HMI, the 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, reaching their highest levels since August 2001.
The index gauging traffic of prospective buyers rose four points to 50, its highest reading since February of 2000.