In cavity-nesting vertebrate species, reproduction is limited by the production and availability of tree cavities. Excavating species may create new cavities to exploit food resource pulses in novel habitats, but availability of nesting resources may be constrained with increases in population densities. Over a 15-y period, we monitored the reproduction of cavity nesters and a large-scale mountain pine beetle (Dendroctonus ponderosae) outbreak that killed all mature lodgepole pine (Pinus contorta var. latifolia), at 30 mixed coniferous—deciduous stands in interior British Columbia, Canada. We examined how the probability of excavation of a bark insectivorous, facultative cavity excavator, the red-breasted nuthatch (Sitta canadensis), was influenced by mountain pine beetle abundance and changes in population densities of conspecific individuals and a nest predator, red squirrel (Tamiasciurus hudsomcus). Nuthatches always chose trembling aspen (Populus tremuloides) for nesting regardless of densities of nuthatch nests and availability of beetle-decayed pine as alternate nest trees. The number of nuthatch nests increased in years of increasing densities of beetle-infected pine, and the proportion of freshly excavated nests varied annually, increasing with the beetle outbreak from 26% of all cavities used in 2001 to 70% in 2002 and then declining after the outbreak to 17% in 2009. For each unit increase in densities per hectare of both nuthatches and beetle-infected pine trees, the odds that individuals would excavate a new cavity rather than use an existing cavity increased by 147 times. With each 10 m farther into the coniferous forest interior, the odds of excavation increased by 10 times. These results suggest that facultative excavators are able to exploit novel habitats during insect outbreaks by adjusting their nest-site selection patterns and increasing excavation, but that resource pulses may lead to limitation of nesting resources.