The NAHB/Wells Fargo Housing Market Index measures the strength of the single-family housing market each month through surveys of NAHB members.

The survey asks respondents to rate market conditions for the sale of new homes at the present time and in the next 6 months as well as the traffic of prospective buyers of new homes.

It gauges builder perceptions of current single-family home sales and sales expectations for the next six months as "good," "fair" or "poor."  The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to 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. " Any number over 50 indicates that more builders view conditions as good vs. poor.