While the level of 35 is still very weak, The HMI has been accelerating at a very rapid pace over the past 9 months. Housing Starts, which have been up over 25% in the first five months of 2012 versus the first five months of 2011, should continue to grow strongly over the rest of 2012 as the HMI tends to lead Housing Starts by 3-5 months. Despite all the worries about Europe and China's economic growth, the worst housing market since the beginning of record keeping is clearly recovering and will tend to support (although not guarantee) above trend growth for the next 3-5 years.
The idea that the U.S. is entering a recession, based on this one indicator, is laughable. The Housing Sector is now growing at 20+% real rates in 2012 and the 2MM+ construction jobs lost from 2006 through 2011 should slowly be regained.
As I write this post, Ben Bernanke is giving his semi-annual report on Monetary Policy to congress. Based on the trends in housing, I would not expect Bernanke to embark on QE3. Of course, I think Bernanke wants to increase the pace and level of the recovery, so QE3 should not be ruled out based on any one indicator.