New construction on U.S. homes edged higher in July, but continued to miss expectations in the latest signal that the housing market's recent stabilization may be coming to an end. Starts rose 1.7% to an seasonally-adjusted 546,000 units in July, the Commerce Department reported Tuesday. The July total was below expectations, however, with consensus estimates largely expecting a pace of at least 555,000 according to surveys by Dow Jones and Reuters. June starts were revised lower to a 537,000 annualized pace, from the 549,000 pace originally estimated. The revision helped July starts show a monthly gain, and placed June housing starts at the lowest level since October of last year. Single-family starts in July fell 4.2 percent in July, the lowest level in more than one year, the Commerce Department said. Permits for new construction, a leading indicator of future building activity, fell 3.1% to 565,000 from 583,000 one month earlier -- reaching the lowest level since May 2009. Economists had expected permits to post a figure of 580,000 for July. Read the full government report. "Starts are still well below the 630,000 plus level we were seeing right before the homebuyer tax credit expired at the end of April," said Paul Ashworth, senior economist at Capital Economics. "The bad news is that activity in the housing market is likely to remain depressed for several years," he said in an email. "The 'good' news, however, is that housing is so depressed it is hard to see activity falling much further from such a severely depressed level." Meshing with the new home sales data, the National Association of Home Builders on Monday said that its index of home builder sentiment fell to a 17-month low amid growing concerns about the nation's economy. Paul Jackson is the publisher of and HousingWire Magazine. Follow him on Twitter: @pjackson