The California Construction Sector Newsletter Date: January 2025 (covering the most recent available data through late 2025, with focus on trends into early 2026) Edition: Special Update – Key Metrics for Financial Decision-Making

Welcome to this tailored newsletter for construction company owners and operators in California. This edition summarizes the latest insights on building permits, construction starts, material costs, labor trends, and other factors critical for budgeting, bidding, and strategic planning. Data draws from reliable sources including U.S. Census Bureau reports, industry analyses (e.g., first tuesday Journal, JM Construction, Dodge Construction Network), and labor market surveys (e.g., BLS, Associated General Contractors). No major breaking news emerged in the immediate past 7 days (mid-to-late January 2026 timeframe), but ongoing trends from Q3-Q4 2025 persist and inform near-term decisions.

Building Permits

California’s building permits remain soft, lagging historical averages by ~16% through late 2025 (e.g., Sept-Nov period). Statewide housing permits were notably low in the first half of 2025 (~49,400 units, a recent low), exacerbating housing shortages. Nationally (influencing CA trends), permits fell to a seasonally adjusted annual rate (SAAR) of ~1.354 million in July 2025 (down 2.8% MoM and hitting lows not seen since 2020), with single-family permits slightly up but multifamily down sharply. In California-specific metros (e.g., San Jose area), permits saw steep declines (e.g., 68% drop in some comparisons from 2020 baselines).

Trend from Previous 2-3 Months (Q3-Q4 2025): Permits continued to underperform, with no strong rebound. This signals constrained new project pipelines, particularly residential, potentially reducing near-term revenue opportunities but also competition in bidding for available work.

Implication for Your Business: Secure projects early where possible; low permit volumes may delay starts and cash flow. Monitor local municipal reports for pockets of activity.

Construction Starts

Residential starts in California show mixed signals: Single-family residential (SFR) starts down 13.3% YoY in the six-month period ending August 2025 (~28,633 units), while multifamily starts rose 16.7% (~23,325 units), reflecting a shift toward denser housing. Nationally, starts pulled back in some months (e.g., down 10% in July 2025 overall) but rebounded modestly later (e.g., up 1.7% in August to $1.23 trillion SAAR). Nonresidential in California/Pacific region benefited from megaprojects (e.g., $18B+ in CA through mid-2025), driving gains in industrial, data centers, and public sectors.

Trend from Previous 2-3 Months (Q3-Q4 2025): Residential weakness persisted (e.g., SFR forecast down ~6.6% for full 2025), but multifamily and nonresidential (e.g., commercial, infrastructure) showed relative strength. Delays could inflate costs by 15-25%.

Implication for Your Business: Pivot toward multifamily, industrial, or public/nonresidential bids where momentum exists. Residential SFR may face headwinds from higher interest rates and buyer caution.

Material Cost Increases/Decreases

Material costs remain elevated and volatile in 2025-2026. Overall inputs up ~2.3% YoY (as of Sept 2025), with nonresidential costs rising 2.6%. Key spikes include copper pipe (~40% up), copper wire (14-17%), steel (15-25% volatility), and electrical/plumbing components (20-35% higher). Lumber stabilized or dipped in some cases but faces tariff risks (e.g., proposed 10% on imports). Forecasts: Nonresidential inflation ~4.4%, residential ~5%, non-building ~4.3% for 2025, with monthly increases of 1.5-2%. Tariffs on imports (e.g., Chinese steel/copper) add uncertainty.

Trend from Previous 2-3 Months (Q3-Q4 2025): After rapid prior increases, supply chains stabilized somewhat, but volatility persists (e.g., steel and energy-related materials up). No sharp decreases noted recently.

Implication for Your Business: Lock in prices via forward contracts where feasible; budget 5-7%+ increases in bids. Monitor tariff developments for potential escalation.

Labor Increases/Decreases and Shortages

Labor shortages remain acute: 92% of firms report difficulty hiring, with shortages causing project delays (45% of firms affected). California saw construction job losses in some periods (e.g., -3,300 in July 2025), but wages stay competitive—average hourly earnings ~$39.7 (up 3.7% YoY nationally; residential non-supervisory up 9.2% in spots). Immigration enforcement impacts ~1/3 of firms. Industry needs ~439,000 net new workers nationally in 2025 (with CA share significant due to demand). Wages grew but slowed from peaks, hinting at slight stabilization.

Trend from Previous 2-3 Months (Q3-Q4 2025): Wage growth decelerated (e.g., from double-digit peaks), but shortages persist, especially skilled trades. Openings fluctuated but stayed high (~306,000 nationally in July).

Implication for Your Business: Factor in 4-6%+ wage pressure in budgeting; invest in retention/training. Delays from shortages could add 15-30% to timelines/costs in high-demand areas (e.g., post-wildfire rebuilds).

Other Key Factors for Financial Decisions

• Policy/Regulatory: 2025 California Building Code (Title 24) effective Jan 1, 2026—focus on electrification, wildfire resilience, seismic upgrades. Submit under 2022 code by Dec 31, 2025 if possible.
• Economic Context: High interest rates curb residential demand; growth in nonresidential (e.g., data centers, military). Wildfire rebuilding (e.g., LA area) may spike local demand/labor costs.
• Overall Outlook: Soft residential but opportunities in multifamily/nonresidential. Inflation/tariffs pose risks; secure contracts and hedge costs.

Sources: U.S. Census Bureau (New Residential Construction data), firsttuesday Journal, JM Construction newsletters, Dodge Construction Network, Associated General Contractors (AGC), Bureau of Labor Statistics (BLS), ConstructConnect, and related industry reports (accessed via web searches for latest trends).

This newsletter is for informational purposes—consult local data and professionals for company-specific advice. Stay proactive in a challenging but opportunity-rich market!