The decline was primarily on the more volatile multifamily side, with single-family housing production edging down just 1.4%. Meanwhile, permits for new construction posted modest gains in both sectors.
"At this point, most builders are only looking to replenish their depleted inventories of new homes for sale, but otherwise holding off on new projects," said National Association of Home Builders (NAHB) Chairman Bob Nielsen, a home builder from Reno, Nev.
"While we would like to get more crews back on the job, we need to see solid improvement in consumer demand, greater access to credit for both builders and buyers and a reduction in the number of foreclosed properties on the market before we can ramp up new production," Nielsen added.
"Today's numbers are completely consistent with NAHB's forecast for the quarter, and are in keeping with the anemic economic and job growth we are seeing across most of the country," said NAHB Senior Economist Robert Denk.
"That said, we continue to anticipate modest gains in new-home production through the end of this year with greater momentum building into 2013, and some pockets of improvement are already evident in about a dozen metros nationwide," he explained.
Single-family housing starts declined 1.4% to a seasonally adjusted annual rate of 417,000 units in August, while multifamily production, which tends to display greater volatility on a month to month basis, declined 13.5% to a 154,000-unit rate.
Regionally, combined starts activity was mixed in August, with the Midwest and West posting gains of 2.6% and 2.2%, respectively, and the Northeast and South posting declines of 29.1% and 3.3%, respectively.
Building permits, which can be an indicator of future building activity, rose 3.2% to a seasonally adjusted annual rate of 620,000 units in August, their highest level since last December.
Single-family permits gained 2.5% to 413,000 units, while multifamily permits gained 4.5% to 207,000 units.
Permit issuance rose in three out of four regions in August. The South was the only region to post a decline, of 1.3%, while the Northeast, Midwest and West posted gains of 3.3%, 6.3%, and 11.3%, respectively.