Editor's note: As part of our partnership with PBS's Nightly Business Report, TheStreet's Robert Walberg appeared on NBR (watch video) to discuss the best ways to play the housing market.

Don't be deceived by today's seemingly bullish housing starts data -- the outlook for the housing industry remains bleak.

Though the 10% jump in starts announced this morning created a sense of relief among investors, when you dig past the headline number, you realize that most of the gain came from multi-family starts -- not single family homes. New construction of single-family homes rose by a less spectacular 4.3% to an annualized rate of 438,000. While the gain was encouraging, starts are still 9% below last year's level.

More discouraging was the news that permits for new construction of single-family homes fell 1.2% to an annual rate of 401,000. Given that the permit data are considered among the most reliable indicators of future growth in the sector, it's tough to get overly excited about the outlook for housing when August marked the fifth straight month of declines.

The permit data are consistent with the news out of home-builder

Lennar

(LEN) - Get Report

, which

rallied yesterday

on better than expected earnings even as the company reported that the number of buyers agreeing to purchase a new home during the quarter ending August 31 fell 15% from year-ago levels. Bottom-line, housing demand remains woefully soft.

So while there might be short-term trading opportunities in the deeply oversold home construction sector, the stocks still don't represent good long-term investments. However, there are few ways for investors to capitalize on the moribund housing market.

With relatively high unemployment levels, tight credit conditions and sluggish wage growth constraining the building and sale of new homes for the foreseeable future, homeowners will turn to sprucing up their current residences. That's good news for companies like

Home Depot

(HD) - Get Report

,

Sherwin-Williams

(SHW) - Get Report

and

Masco

(MAS) - Get Report

, who provide the tools and products necessary for home improvement.

While Home Depot is a well-known name, its stock fell on hard times a few months back, dropping 28% from May to July. However, the stock has stabilized and is starting to show signs of regaining momentum. A solid management team, discounted valuations and a 3% dividend yield are more reasons to like this industry leader.

Another stock bouncing off recent lows is Masco. The company provides everything from plumbing products to new cabinets. Sales and earnings took a hit over the past couple of years, but when you combine the improved outlook for home improvement with the soft comparisons, the opportunity for headline driven gains is considerable. This is an under-owned, under-loved stock that could easily outperform over the next 12 to 18 months.

Finally, Sherwin-Williams is a leading provider of paints and coatings. Painting is one of those relatively low cost, easy ways to beautify your current home. Unlike Home Depot and Masco shares, SHW is on the move -- up 21% year-to-date. Look for it to break above its old high of $80, resulting in a long-term test of the $95 area. In the meantime, enjoy the nice 2% dividend yield.

Robert Walberg is chief market strategist and editor of Premium Products at

TheStreet

. Prior to joining

TheStreet

, Walberg was founder and president of Chartwell Asset Management, a financial advisory company. Before founding Chartwell, he worked as a financial analyst and columnist for

MSN Money

from 2003 to 2008. Walberg was on the founding team at

Briefing.com

from 1996 to 2003, working as chief equity analyst, formulating the company's near-, intermediate- and long-term market positions. He was regularly quoted by

The Wall Street Journal

,

Bloomberg

,

Reuters

and

Investor's Business Daily

and made guest appearances on

Fox Business

,

CNBC

,

CNN

,

ABC World News

and

The Daily Show with Jon Stewart

. Walberg received a bachelor's degree in political science from the University of Illinois.