New U.S. housing starts and permits unexpectedly fell in July, pulled down by steeper declines in multifamily units, a government report showed on Tuesday.

The Commerce Department said housing starts fell 1 percent to a seasonally adjusted annual rate of 581,000 units, well below market expectations for 600,000 units. June's housing starts were revised up to 587,000 units from the previously reported 582,000 units.

Multifamily unit starts tumbled 13.3 percent in July. However, groundbreaking for single family homes -- the worst-hit part of the housing market, rose 1.7 percent to an annual rate of 490,000 units, the highest since October.

Compared to July last year, housing starts dropped 37.7 percent.

New building permits, which give a sense of future home construction, fell 1.8 percent to 560,000 units in July. That compared to analysts' forecasts for 580,000 units. Compared to the same period a year-ago, building permits declined 39.4 percent.

The inventory of total houses under construction fell to record low 609,000 in July, the department said, while the total number of permits authorized but not yet started also hit a record low at 102,300.

(Reporting by Lucia Mutikani; Editing by Neil Stempleman)