The Leading Markets Index (LMI) is an economic indicator that identifies markets that are now approaching and exceeding their former normal levels of economic progress.
Using three critical measures of economic health--single-family building permits, home prices and employment--the LMI compares the current levels of these three components to their last normal, sustainable levels. A comparison of individual markets is calculated, as well as an overall national number. All markets (350+ metropolitan areas) are scored. The score is the average of the three components' proximity to the last period of normality.
An index value above one indicates the market has advanced beyond the previous sustainable level of economic activity. An index value above the national index level indicates the market is doing better than the country as a whole, moving beyond the most recent period of normal economic growth.
Index components are calculated by taking the average permit, price or employment number for the past year and dividing it by its annual average over the last period of normal growth. For single-family permits and house prices, 2000-2003 is used as the last normal period, and for employment, the year before the beginning of the Great Recession in 2007. Permits and employment are divided by population in the current and normal period to account for growth that did take place. The three components are averaged to provide a score for each market.