UPDATE 1-US housing starts and permits tumble in July

(Adds details on data, quotes, market reaction)

WASHINGTON, Aug 19 (Reuters) - U.S. home building projects started in July fell 11 percent to the lowest annual rate in more than 17 years, while building permits tumbled 17.7 percent, the Commerce Department reported on Tuesday.

The annual pace of housing starts at 965,000 slimly beat Wall Street's expectations of 960,000, but it was the lowest since a 921,000 unit rate in March 1991. In June, housing starts rose 10.4 percent, revised up from the previously reported 9.1 percent.

Building permits, an indicator of future construction, dropped to an annual rate of 937,000, well below the 970,000 analysts polled by Reuters had forecast.

The magnitude of the drop in permits was the biggest since a plunge of almost 24 percent in February 1990, while the number was the lowest since March this year, when they were 932,000.

Single family homes, which constitute the bulk of new housing, were especially weak. The annual unit rate of 641,000 single family homes started in July was the lowest since January 1991, when they were 604,000. Building permits were 584,000, the lowest since 523,000 in August 1982.

U.S. stocks extended their losses and U.S. Treasury bond prices pared their gains after the data were released.

In June, new home construction was boosted by a change in New York City building codes. But July's national numbers hinted that the United States may still be mired in a housing downturn.

"It can be seen as a payback in June from the building code change in New York City. We may see another decline in August," said Dana Saporta, economist at New York's Dresdner Kleinwort Securities LLC.

"The fundamentals in housing are still poor," Saporta added.

(Reporting by Lisa Lambert, Editing by Chizu Nomiyama)