NEW YORK (TheStreet) -- The housing market is still a ways off from any sense of real recovery as potential buyers remain cautious, home inventories remain high and building activity remains sluggish, according to an analyst with the Credit Union National Association.

The current level of homebuilding is "severely depressed," Mike Schenk, vice president of economics and statistics with CUNA told


, referring to data released Tuesday morning that showed

July housing starts at a seasonally adjusted annual rate of 604,000

. He pointed out that annualized historical levels of housing starts averaged around 1.5 million dating as far back as the 1960s, though as a glimmer of hope July's rate was around 10% higher than year-earlier levels.

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"Unfortunately none of the data we see suggest that there will be a significant turnaround anytime soon. While mortgage interest rates are near all-time lows and housing affordability is near all-time highs, consumers remain cautions, builders remain dejected ... and permit activity suggest very little new construction on the horizon."

Homebuilders share Schenk's pessimism; On Monday, data showed that

homebuilder sentiment held steady at a low reading of 15 in August

as the usual suspects of an oversupply of homes, inaccurate appraisal values and tight lending kept home purchasers at bay.

The NAHB Housing Market Index measures builder perceptions of current single-family home sales and sales expectations for the next six months. Any reading below 50 indicates poor sentiment. The index has not been above 50 since April 2006.

Schenk expects softness in the housing market to persist for the foreseeable future.

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"Extreme and prolonged weakness in labor markets are the key underlying feature of housing market weakness" with the true unemployment rate -- including the underemployed and part-time workers looking for full-time work -- near 16%. The "glut of empty homes on the market" -- around 2 million -- plus what is known as the "shadow inventory," or homes kept off the market because owners don't think they will sell in the current environment, adds another 2 million to 2.5 million vacant homes, Schenk estimated.

"The experts tell us that there is a significant amount of foreclosure activity still working its way through the system -- all of which bodes ill for the notion of a quick housing market recovery," he concluded.

The housing and homebuilding sector is well off its 2010 spring peak,

ahead of expiring tax credits

, and is only slightly higher than at the beginning of 2010. Whereas other sectors have begun an economic rebound in earnest, the housing sector continues to lag as a bloated supply of homes for sale -- both newly built and previously owned -- coupled with depressed pricing from foreclosures pressure the market.


SPDR S&P Homebuilders

(XHB) - Get SPDR S&P Homebuilders ETF Report

, an exchange-traded fund that tracks the homebuilder sector, remains nearly 70% off its peak of $46.08 in early 2006. The

iShares Dow Jones U.S. Home Construction

(ITB) - Get iShares U.S. Home Construction ETF Report

ETF remains more than 80% off its peak of $50.10 in the spring of 2006.

Among individual builders, stocks were mixed Tuesday following the latest housing data.


(PHM) - Get PulteGroup, Inc. Report

fell 0.2%,

D.R. Horton

(DHI) - Get D.R. Horton, Inc. Report

lost 0.4% and

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(LEN) - Get Lennar Corporation Class A Report

, largely considered a leader among the homebuilders, shed 1.4%. Small-cap builders

KB Home

(KBH) - Get KB Home Report


Hovnanian Enterprises

(HOV) - Get Hovnanian Enterprises, Inc. Class A Report

were higher by 2.1% and 5.9%, respectively, as was

Toll Brothers

(TOL) - Get Toll Brothers, Inc. Report

, which gained 0.7%.


Written by Miriam Marcus Reimer in New York.

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