Markets in 56 of the approximately 350 metro areas nationwide returned to or exceeded their last normal levels of economic and housing activity, according to the National Association of Home Builders/First American Leading Markets Index (LMI).

“More markets are slowly returning to normal levels and we expect this upward trend to continue as an improving economy and pent-up demand brings more home buyers back into the marketplace,” said NAHB Chairman Rick Judson.  “Policymakers must be careful to avoid actions that would harm consumer confidence and impede the ongoing recovery.”

“More than 35 percent of all the markets on this month’s LMI are operating at a capacity of 90 percent or better of previous norms, which is a good sign that the housing recovery will continue to pick up steam in 2014,” said Kurt Pfotenhauer, vice chairman of First American Title Insurance Co., which co-sponsors the LMI report.

The LMI shifts the focus from identifying markets that have recently begun to recover, which was the aim of a previous gauge known as the Improving Markets Index, to identify those areas that are now approaching and exceeding their previous normal levels of economic and housing activity.

Forty five percent of metro areas are recovering at a faster pace than the nation as a whole, with smaller markets leading the way. Of the 56 markets that are at or above normal levels, 48 of them have populations that are less than 500,000, and many of these local metros are fueled by a strong energy sector, which is producing solid job and economic growth.