As employment and home prices reach and surpass previous levels of normal economic and housing activity, building permits continued holding markets back from hitting historic norms during the third quarter, according to the National Association of Home Builders.

Single-unit building permit totals are recovering from declines earlier this year, but still remain sluggish. Permits are expanding though, and the number of markets at or above normal growth levels grew 6% from the previous quarter. Single-unit building permits were highest in Houston, Dallas, Atlanta, Phoenix and Washington, D.C., during the quarter.

Permits are one of three indicators used in the NAHB/First American Leading Markets Index, which examines metro areas to determine market performance relative to normal levels of economic and housing activity.

Employment levels and home prices are the other two variables used in the index. Employment has reached 99% of normal activity and home prices are well above normal, at 155%.

"Home price appreciation remains the strongest component of the HMI, and strong employment numbers also bode well for the continued growth of the housing sector," NAHB Chief Economist Robert Dietz said in a press release.

"While permits continue to inch upward, they remain the weakest element of the index and show that builders need to manage supply-side hurdles, such as rising material prices and labor shortages," he added.

The last normal period for single-family permits and house prices is considered between the years 2000-2003, and for employment it's considered 2006, the year before the start of the Great Recession.

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