Only 52 of the 350 metro areas included in the National Association of Home Builders/First American Leading Markets Index have returned to their activity levels before the decline that started around 2006 and accelerated in 2008.

Overall, based on permits, prices and employment figures the country’s housing market is at 85 percent of its normal level, the survey said.

Large cities where activity is at or better than the mid-2000s peak includes Honolulu, Oklahoma City, Houston and Harrisburg, Pa. Smaller cities where prices and activity have fully recovered include Bismarck, N.D.; Florence, Ala.; and Casper, Wyo.

"Smaller metros are leading the way to a housing recovery, accounting for 43 of the top 50 markets on the current LMI," David Crowe, the association’s chief economist. "This is very much in keeping with the results of our previous index for improving markets, and is an indication of the extent to which local economic conditions dictate the strength of individual housing markets."

The Leading Markets Index replaces the Improving Marketing Index, which measured cities that were to recover and shifts it to the locales where a recovery is nearly complete.

 "This index helps illustrate how far the U.S. housing recovery has come, and also how much further it has to go as we continue to face some significant headwinds in terms of credit availability, rising costs for lots and labor, and uncertainties regarding Washington policymaking," said association Chairman Rick Judson, a home builder from Charlotte, N.C.  

The full index is available at the NAHB website.