The California Construction Sector Newsletter Edition: February 5, 2026 Date: February 5, 2026 Prepared by Grok (using web lookups from sources including U.S. Census Bureau, Associated Builders and Contractors (ABC), JM Construction reports, California Department of General Services (DGS), and industry analyses)

Executive Summary for Construction Company Owners

The past 7 days (late January to early February 2026) show no major breaking news or sharp shifts in California-specific building permits, construction starts, material costs, or labor dynamics. Trends from late 2025 into early 2026 remain consistent: softness in residential activity, persistent labor shortages, stabilizing but elevated material costs with tariff risks, and ongoing challenges from high interest rates, supply chain issues, and regulatory factors. Nonresidential sectors (e.g., industrial, infrastructure, data centers) offer more resilience.

Key implications for financial decisions: Budget conservatively with 4-6%+ escalation buffers for materials and labor in 2026 bids. Focus on multifamily/infrastructure opportunities, retention strategies for skilled workers, and tariff monitoring. Wildfire rebuilds and potential 2028 Olympics prep could provide localized boosts.

Building Permits and Construction Starts

• Past 7 Days: No significant new California-specific announcements or data releases on permits or starts. National context (influencing CA) from recent Census Bureau reports shows October 2025 housing permits at ~1.412 million SAAR (seasonally adjusted annual rate, slight decline) and starts at 1.246 million SAAR (down 4.6% month-over-month).
• Recent Trends (Previous 2-3 Months / Late 2025): Permits lagged ~16% below historical averages through September-November 2025. First-half 2025 housing permits were at low levels (~49,400 units, lowest since 2014 outside pandemic). Single-family residential (SFR) starts down 13.3% year-over-year in periods ending mid-2025 (~28,633 units), while multifamily starts rose 16.7% (~23,325 units), signaling a shift to denser housing. Forecasts indicated a 6.6% drop in full-year 2025 SFR starts, with overall residential below peaks.
• Outlook & Decision Factors: Expect continued caution in residential, but potential upside from wildfire recovery permits (over 2,600 issued post-recent events, faster than average) and infrastructure. Monitor local municipal reports for pockets of activity; multifamily and nonresidential may offer steadier pipelines.

Material Cost Increases/Decreases

• Past 7 Days: No sharp California-specific changes reported. National input prices rose modestly (e.g., 0.6% month-over-month in November 2025 per ABC analysis of BLS data), driven by tariffs.
• Recent Trends (Previous 2-3 Months / Late 2025): California Construction Cost Index (CCCI) showed easing late 2025 (October: 10,418 → November: 10,293 (-1.2%) → December: 10,258 (-0.3%)), indicating stabilization after volatility. Nationally, materials up ~2-3.5% year-over-year in spots, with key spikes in copper (up 30-40% YTD), steel (15-25% volatility), and electrical/plumbing (20-35% higher). Lumber stabilized or dipped but faces tariff risks (e.g., proposed 10%+ on imports). Nonresidential inflation ~4.4%, residential ~5% forecasted for 2025, with monthly increases of 1.5-2%.
• Outlook & Decision Factors: Costs remain 25-28% above pre-2020 levels; tariffs on metals/lumber add uncertainty and could push 2026 escalation to 6-8%. Low demand from slowed residential mitigated some rises (e.g., concrete/PVC flattening). Build in 5-10% buffers for bids, especially metals/electrical; lock in prices where possible.

Labor Increases/Decreases and Shortages

• Past 7 Days: No new major reports. Ongoing national need for ~349,000 net new workers in 2026 (down from prior years due to modest spending growth), with California share significant.
• Recent Trends (Previous 2-3 Months / Late 2025): Acute shortages persist (92% of firms report hiring difficulty, causing delays in 45% of cases). Wages competitive (national average hourly ~$39.7, up 3.7% YoY; some residential up 9.2%). California minimum wage rose to $16.90/hour effective January 1, 2026. Immigration enforcement affects ~1/3 of firms. Wage growth decelerated from peaks but remains upward due to shortages, especially skilled trades.
• Outlook & Decision Factors: Factor 4-6%+ wage pressure into budgeting; invest in retention, training, and diverse hiring. Shortages could worsen with policy changes; nonresidential (e.g., data centers) sees strong demand.

Other Key Information for Financial Decisions

• Regulatory stability from six-year freeze on residential building codes (started late 2025) aids planning but hasn’t reversed declines.
• Opportunities in nonresidential (megaprojects, infrastructure) and wildfire rebuilds.
• Risks: Tariffs, insurance hikes in fire-prone areas, high interest rates, and potential immigration impacts on workforce.
• Sources: JM Construction weekly reports (January 2026 editions), ABC analyses, U.S. Census Bureau New Residential Construction releases, DGS CCCI data, BLS Producer Price Index, and related industry/government sites.

This newsletter draws from the most recent available public data; check official sources for real-time updates. For tailored advice, consult local economists or associations like ABC or California Building Industry Association. Stay proactive—2026 looks steady but cautious.