Highlights from the Past 7 Days (approx. January 8-15, 2026)

 

No major breaking news emerged in the immediate past week on new building permits, construction starts, or sharp shifts in material/labor costs specific to California. Activity focused on ongoing recovery from 2025 Los Angeles wildfires (Palisades and Altadena fires), with permitting progress noted as “historic” for rebuilds. Over 2,600 residential permits issued so far (about 1 in 5 of lost homes), with 3,340+ under review—faster than historical averages due to emergency streamlining. Broader sector discussions emphasized regulatory transitions, including the 2025 California Building Standards Code effective January 1, 2026, requiring updates for new applications (many jurisdictions enforced strict December 2025 deadlines to stay under prior codes).

Other notes:

• Retention caps in private contracts (effective Jan 1, 2026) cap at 5%, aiding subcontractor cash flow.
• Continued emphasis on expedited permitting for disaster recovery and affordable housing pushes.

Building Permits and Construction Starts

Recent data shows ongoing softness in residential activity heading into 2026:

• Permits lagged ~16% below historical averages through late 2025 (Sept-Nov period).
• Single-family residential (SFR) starts down 13.3% year-over-year in the six months ending August 2025 (28,633 units).
• Multi-family starts up 16.7% in the same period (23,325 units), reflecting shifts toward denser housing.
• National context (impacting CA): October 2025 permits at ~1.41 million SAAR (down slightly); starts at 1.25 million SAAR (down 4.6% MoM).

Trends from Prior 2-3 Months: Slowdown persisted into late 2025, driven by high interest rates, tight lending, and trade uncertainties. Forecasts predicted a 6.6% drop in full-year 2025 SFR starts, with multi-family holding stronger but overall residential below peaks. A six-year freeze on new residential building codes (starting Oct 2025) provides planning stability but hasn’t reversed declines. Expect continued caution into 2026, with potential boosts from wildfire rebuilds and infrastructure/2028 Olympics prep.

Material Cost Trends

Mixed signals, with some stabilization but upward pressures looming:

• California Construction Cost Index (CCCI): Downward in late 2025 (Oct: 10,418 → Nov: 10,293 (-1.2%) → Dec: 10,258 (-0.3%)), showing easing after volatility.
• National influences: ENR indices up 3.4-3.9% YoY ending Nov 2025; materials up 2% quarterly.
• Key drivers: Tariffs on metals (copper +30-40% YTD), lumber (potential 25-35% hikes from Canadian duties), steel (15-25% volatility). Low demand from slowed starts mitigated some rises (e.g., concrete/PVC flattening).
• Nonresidential: Some acceleration (e.g., aluminum +13.7% YoY, steel +8.8% in mid-2025 data).

Trends from Prior 2-3 Months: Stabilizing/easing in CA-specific indices, but tariff threats and supply chain issues persist. Overall, costs remain 25-28% above pre-2020 trends; budget 5-10% buffers for 2026 bids, especially for metals/lumber. Shift toward industrial/multifamily projects amid residential slowdown.

Labor Trends

Persistent shortages and wage pressures:

• National shortage: ~439,000 workers needed in 2025, rising to ~499,000-500,000 in 2026.
• CA-specific: Ongoing challenges, with immigration enforcement risks potentially worsening availability (construction relies heavily on foreign-born workers).
• Wages: Rising (e.g., ~4% YoY nationally; CA labor costs up 4% annually in some 2025 data, 21% since 2019). Field craft averages ~$36-39/hour, premium over other sectors.

Trends from Prior 2-3 Months: Shortages delayed projects; wages up to attract/retain talent amid competition. Expect continued upward pressure into 2026, especially with rebuild demand and infrastructure. Invest in training/retention to mitigate.

Other Factors for Financial Decisions

• Regulatory/Policy: New 2026 code cycle brings changes (e.g., energy efficiency, warehouse standards); grace periods ended Dec 2025. Disaster recovery prioritizes insured projects.
• Risks/Opportunities: Tariffs could add 5-10% to costs; focus on multifamily/industrial/public works (e.g., healthcare). Wildfire rebuilding surges demand but adds contingencies.
• Recommendations: Build buffers for materials/labor; prioritize cash-flow-friendly contracts; monitor federal tariffs and interest rates for 2026 shifts.

Sources: JM Construction Report (Dec 2025), AGC analyses, U.S. Census Bureau/HUD New Residential Construction (Oct 2025 data), DGS California Construction Cost Index, NAHB reports, CalMatters, state legislative updates, and BLS/associated industry analyses. Data reflects latest available as of mid-January 2026; trends may evolve with new releases. For personalized advice, consult financial/professional experts.

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