Housing starts dropped 14.4 percent in August to a seasonally adjusted 956,000-unit annual rate, the NAHB said.

Citing government data, the National Association of Home Builders said a 31.7 percent decline in multifamily housing starts was responsible for much of the drop.

Single-family home construction declined 2.4 percent to a seasonally adjusted 643,000-unit pace.

"The August drop in multifamily starts is not too surprising, given how volatile the numbers have been the last 18 months," said David Crowe, chief economist for the National Association of Home Builders. "And while single-family starts registered a slight decline, low mortgage rates, affordable home prices and pent-up demand will keep single-family production moving forward in 2014."

Housing starts declined in all regions. The Northeast, Midwest, South and West posted respective drops of 12.9 percent, 10.3 percent, 10.9 percent and 24.7 percent.

NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Del., said despite the decline, many members remain bullish on the year.

"Our members are telling us that traffic to new model home sites and sales expectations are on the rise," he said. "Despite the monthly blip, single-family starts are still 8 percent above last year's level."