The Commerce Department says builders began work on a seasonally adjusted 571,000 homes last month, a 5 percent decline from July. That's less than half the 1.2 million that economists say is consistent with healthy housing markets.
Single-family homes, roughly two-thirds of home construction, fell 1.4 percent. Apartment building plunged 12.4 percent. Building permits, a gauge of future construction, rose 3.2 percent.
Hurricane Irene also slowed construction in the Northeast.
While home construction represents a small portion of the housing market, it has an outsize impact on the economy. Each home built creates an average of three jobs for a year and about $90,000 in taxes, according to the National Association of Home Builders.