In Hawai'i's hot housing market, it's unusual to find a statistic like this — sales of new homes fell 32 percent in the third quarter from a year ago.

It's not a lack of demand but a shortage of manpower and an increase in material costs that has slowed the building of new homes.

"There just aren't enough construction workers," said Castle & Cooke Hawai'i president Harry Saunders. "Not enough sub-contractors, not enough engineers, not enough consultants to handle all of the work to go forward."

There were only 354 new homes on the market in the third quarter compared with 606 during the same time last year, according to a market update by local researcher Ricky Cassiday. As the supply grows scarce, prices are climbing. The average closing price on new homes — including single-family homes, condominiums and townhouses — jumped from $442,201 in the third quarter of 2004 to $514,287 this year, Cassiday said.

Emerson Mateo, who owns his own general contracting company, Platinum Builders Inc., had to turn down work building new homes during the third quarter because he didn't have enough workers.

"I had nine guys but I could have used 24 — at least 24," Mateo said. "Then we wouldn't have had to say no."

Mateo said he has noticed more Mainland construction workers appearing on local job sites. "There were so many coming in from the Mainland, but it still wasn't enough," he said.

Only three of nine developers at this year's Parade of Homes had homes for sale in October.

"Everything that they have in inventory is being sold the minute they put it on the market," said Karen Nakamura, CEO of the Building Industry Association-Hawai'i, which hosts the Parade of Homes. "They're selling as fast as they're being produced. It's just gone."

Castle & Cooke Hawai'i has seen some of its recent home projects delayed six months to a year as it competes for workers and construction materials, Saunders said. The company's construction costs jumped 8 percent in 2004, 8 percent this year and Saunders expects another 8 percent increase next year.

Mike Jones, president of the local D.R. Horton subsidiary Schuler Homes, has watched a steady increase in the price of materials as hurricane-damaged areas of the Mainland have needed supplies such as drywall while oil costs have driven up prices for such petroleum-based items as PVC piping.

"In some cases we've seen 20 to 30 percent increases for PVC pipe," Jones said. "You can get it, but the prices are going up."

Sales of new single-family homes fell 14 percent while the number of available units dropped 19 percent. Sales of new multifamily homes — condos and townhouses — were down 44 percent, and the number of available units plummeted 61 percent.

"Material costs have gone up but there's just not a lot of labor," Cassiday said. "It all adds up to higher prices and a backed-up market."

The market for existing housing also has been tight for years and is just now showing signs of easing. In the third quarter the number of previously owned single-family homes sold was up 3 percent from a year earlier at 1,324 units. The median price in the third quarter was $615,000. In November the number of previously owned homes sold dropped slightly, but prices climbed.

Clearly the demand for new homes is there if developers could find workers. But the Islands' low unemployment rate has made that difficult. Hawai'i has led the nation with the lowest unemployment rate for eight months in a row, and employers from a wide range of industries have struggled to recruit new workers.

Hawai'i's trade unions and the University of Hawai'i system have stepped up apprentice recruitment and training, "but it takes one to two years for them to really hit the workforce," Saunders said.

The statewide labor picture also has hampered the construction industry as staffing shortages among public agencies and various other entities involved in processing construction approvals have added to the delays, Cassiday said.

"The labor situation isn't just restricted to calling the contractor," Cassiday said. "It's also calling the other part of the tail that wags the dog, which is whatever public agencies have a hand in basically producing houses. You have to get your plans checked, all kinds of inspections, the electrical guy, the water guy. We're in a labor-constrained market where all of these things are adding up."

Tight supplies and strong demand are pushing Hawai'i's housing market even more toward multiple-unit, multiple-story condominiums, Cassiday said.

"As you go into a high-cost environment, the easiest way to get around it is to produce high-rises," Cassiday said. "They're cheap because they spread everything out over a smaller parcel of land and one roof. They're able to deliver housing efficiently in large numbers."

Although the number of multi-family units dropped a whopping 61 percent in the third quarter, Cassiday expects the market to rebound in the first quarter of 2006 as the first wave of units at Hokua, Ko'olani and Moana Pacific become available and townhouse production in 'Ewa picks up.

Overall, however, Nakamura of the BIA worries about the effects of labor shortages and higher priced materials on Hawai'i's construction industry.

"We are in a crisis mode right now," Nakamura said. "Builders are producing as fast as they can. But how do we produce more housing at a faster rate so that people can take advantage of the low interest rates that we still have?"

Reach Dan Nakaso at dnakaso@honoluluadvertiser.com.