California Construction Sector Newsletter

Date: January 29, 2026 

Key Highlights: Past 7 Days (Late January 2026)

• No significant new developments reported in building permits, construction starts, material cost changes, or labor shifts specific to California in the most recent week. Discussions continue around regulatory transitions (e.g., 2026 California Building Standards Code effective January 1, 2026) and broader tariff impacts.
• Ongoing wildfire rebuild efforts in areas like Los Angeles show faster permitting (over 2,600 residential permits issued so far for lost homes, with more under review), but this is localized and emergency-driven rather than a statewide surge.
• National influences (e.g., material price increases tied to tariffs) continue to affect California bids and planning.

Building Permits

• California’s building permits remain soft, lagging ~16% below historical averages through late 2025 (September–November data, with no major reversal indicated into early 2026).
• Housing permits were notably low in the first half of 2025 (~49,400 units), the lowest since 2014 outside pandemic periods, exacerbating shortages.
• Recent Census data shows private housing units authorized continuing at subdued levels nationally (e.g., October 2025 at ~1.41 million SAAR), with California metros experiencing declines.
• Trend from previous 2–3 months: Consistent weakness in residential permitting, with no strong rebound. Multifamily holds slightly better in some areas, but overall pipeline signals caution for new residential projects.

Financial implication: Limited new project starts in residential could mean tighter competition for available work; prioritize multifamily, infrastructure, or rebuild opportunities.

Construction Starts

• Residential starts show mixed signals: Single-family residential (SFR) down significantly (e.g., 13.3% YoY in periods ending mid-2025), while multifamily up (16.7% in similar periods), reflecting a shift to denser housing.
• Nonresidential benefits from megaprojects (e.g., industrial, data centers, public/infrastructure in the Pacific region, including CA examples like LAX improvements).
• Nationally, starts ended 2025 on an upswing in some categories (e.g., nonbuilding up), but residential trailed (down 4.8% for the year overall).
• Trend from previous 2–3 months: Residential weakness persisted (SFR forecast down ~6.6% for full 2025), but multifamily and nonresidential showed relative resilience. Expect continued caution in 2026, with potential boosts from wildfire rebuilds and prep for 2028 Olympics/infrastructure.

Financial implication: Favor bids in multifamily, commercial/industrial, or public sectors over single-family residential for steadier pipelines.

Material Cost Increases/Decreases

• Mixed but upward pressures: California Construction Cost Index (CCCI) showed easing in late 2025 (e.g., October: 10,418 → November: 10,293 (-1.2%) → December: 10,258 (-0.3%)), indicating some stabilization after volatility.
• National trends show increases (e.g., construction input prices up 3.4% YoY as of November 2025, with nonresidential at 3.8%; fastest since early 2023), driven by tariffs on metals (aluminum mill shapes +28%, steel/fabricated products up significantly).
• Key spikes: Copper/steel volatility (15–40% in some categories), lumber facing tariff risks (potential 10–35% hikes), electrical/plumbing components elevated (20–35%).
• Forecasts: 4–5% annual escalation in CA (potentially 6–8% with tariffs); nonresidential ~4.4%, residential ~5%.
• Trend from previous 2–3 months: Stabilization in some areas (e.g., concrete/PVC flattening due to low demand), but tariff-driven volatility persists, with overall costs 25–28% above pre-2020 levels.

Financial implication: Build 5–10% escalation buffers into 2026 bids, especially for metals/lumber/imported materials. Include escalation clauses in contracts to mitigate risks.

Labor Increases/Decreases and Shortages

• Persistent shortages: National construction needs ~349,000 net new workers in 2026 (down from prior years but still significant), with upward pressure on wages (~4% YoY baseline, higher in CA due to regional factors).
• In California, ~40% of workers are immigrants, adding volatility; 92% of companies reportedly struggle to find workers in some reports.
• Wages rising (field craft ~$36–39/hour, premiums over other sectors).
• Trend from previous 2–3 months: Chronic shortages continue, worsening delays and costs. Macro headwinds (e.g., aging workforce, policy uncertainty) keep pressure on.

Financial implication: Factor in 4–6%+ wage inflation and potential delays from hiring challenges. Consider training/incentives or partnerships to secure skilled labor.

Other Factors for Financial Decisions

• Opportunities: Wildfire rebuilds (faster permitting), infrastructure spending, data centers, and multifamily resilience.
• Risks: Tariffs, policy uncertainty (e.g., immigration impacts on labor), high insurance, and regulatory changes.
• Overall outlook: Cautious residential, stronger nonresidential/infrastructure. Monitor local reports and federal tariff developments closely.

Sources: JM Construction weekly reports (January 2026 editions), Associated Builders and Contractors (ABC) analyses, U.S. Census Bureau (building permits/starts), Dodge Construction Network, ENR indices, California Department of General Services (CCCI), and related industry publications (e.g., XL Construction, Construction Dive).