Key Trends & Forecasts for 2026: What Contractors Should Watch
Some contractors will look back on 2026 as the year everything clicked. Others will wonder what went wrong.
The difference won’t be luck. It’ll be preparation.
Construction enters 2026 carrying the weight of tariff uncertainty, persistent labor shortages, and cautious homeowners. Builder sentiment closed 2025 at just 39—well below the breakeven point of 50—with two-thirds of builders still offering incentives to move buyers off the fence. Single-family starts are projected to remain sluggish, barely above 2025’s disappointing numbers.
But here’s what the headlines miss: Remodeling is hitting record highs, technology adoption is accelerating, and contractors who adapt their operations are finding opportunity in the uncertainty.
This isn’t a year to wait out. It’s a year to work smarter.
Material costs: volatility is the new normal
Construction material prices have climbed 34% since December 2020—far outpacing general inflation—and tariffs are adding fresh pressure. NAHB estimates current tariffs add approximately $10,900 to the cost of an average new home. Tariffs on kitchen cabinets and vanities remain at 25%, with a 50% rate delayed until January 2027 pending trade negotiations.
The impact varies by material:
Copper volatility has hit specialty trades especially hard, with some contractors shortening proposal price holds from 30 days to as few as 10.
“We’ve seen copper pipe go up 30 to 40%, and the fittings we use are up 80%,” says Adam Tucci, co-owner of Benjamin Franklin Plumbing of the Triad in North Carolina. His response: escalation clauses, upfront payments to lock in materials, and substituting PEX pipe where code allows.
In response to all of this volatility, 53% of contractors listed materials costs as a top concern for 2026. But only 14% have switched from foreign to domestic suppliers, suggesting most are absorbing or passing through costs rather than restructuring supply chains.
What to do now: Shorten bid validity to 30 days maximum. Add escalation clauses tied to material indices. Build 5-10% contingency into estimates. And talk to suppliers about volume commitments that lock pricing before the next tariff announcement.
Labor shortages: the crunch continues
The construction industry needs 349,000 net new workers in 2026. That’s the lowest projection since 2021, but it’s not a sign of relief. It reflects slower demand, not a solved problem. More than half of those workers are needed just to replace retirees.
The shortage is acute across nearly every trade: 92% of construction firms report difficulty finding qualified workers, and 45% say labor shortages caused project delays in the past year—more than any other factor, including material lead times or permitting.
“Labor is still the bigger headache,” says Dylan Simonson, owner of DryTop Roofing in Arizona. “Good crews are booked out, and finding reliable skilled workers is still tough.”
Mikko Pasanen, founder of Miko LLC, a Phoenix-based general contractor, puts it bluntly: “Finding and retaining skilled tradespeople is our number one cost and schedule challenge across every job.”
The result is wage pressure. Construction wages now average $39.69 per hour, 8.9% higher than the average private-sector rate. Seven out of eight firms raised base pay as much or more than the prior year.
Chauncy Horton, a third-generation licensed general contractor working across the Southeast, sees an opportunity in the crisis. “One thing that would help contractors across the board is if more people were willing to invest in the training and upskilling of our own labor market,” he says. “There’s a lot of young guys in high school and colleges who are open to trade work, but not a lot of contractors are creating space to do the training.”
What to do now: Cross-train existing crews to reduce subcontractor dependency. Raise pay strategically for hard-to-fill positions. Connect with local trade schools and high school CTE programs. And consider how prefab or modular components might reduce on-site labor requirements.
Residential demand: two markets, two strategies
The residential market is splitting in two.
New construction remains sluggish—single-family starts are projected at just 917,000 units in 2026, barely above 2025’s disappointing numbers. High mortgage rates continue to sideline buyers and squeeze builder margins.
But remodeling tells a different story. Homeowner renovation spending is projected to reach a new record of $524 billion by early 2026. The NAHB Remodeling Market Index hit its highest mark in a year at the close of Q4 2025, with sentiment firmly in positive territory even as homebuilder confidence lagged.
What’s driving the gap? When rates make moving expensive, homeowners invest in what they have. An aging housing stock, record home equity levels, and growing demand for aging-in-place modifications all favor renovation over new construction.
“Remodeling will dominate the single-family space, as high interest rates incentivize homeowners to improve, not move,” Pasanen says.
Simonson agrees: “People may delay dream upgrades, but they won’t ignore roofs, HVAC, or structural issues. Energy-efficient upgrades are also staying strong when there’s a clear payoff.”
For contractors, this means opportunity—but also competition. Backlogs are thinner, bids are tighter, and homeowners are more price-sensitive than they were two years ago.
What to do now: If you’re not already in remodeling, consider adjacent services. Focus marketing on repair, replacement, and energy upgrades rather than discretionary projects. Offer phased project options for budget-conscious homeowners. And when price becomes a sticking point, contractor financing through Acorn Finance can turn “maybe next year” into “let’s get started.” You get paid upfront while homeowners spread payments over time.
Technology: from optional to essential
The days of treating technology as a nice-to-have are over. 78% of contractors are already using or testing AI tools. Four in five believe AI will be essential to remain competitive within three years.
Contractors are finding practical uses for AI across their operations:
- Estimating and takeoffs — faster, more accurate bids
- Proposal writing — drafting and polishing client-facing documents
- Document review — distilling specs, contracts, and compliance requirements
- Admin tasks — scheduling, invoicing, follow-ups
But the technology rush isn’t just about AI.
“The contractors who are winning are the ones who’ve cleaned up their processes—better estimating software, faster communication, clearer timelines,” Simonson says. “It’s less about flashy tech and more about being organized and responsive.”
What to do now: Start with one high-impact tool: estimating software, a CRM for lead tracking, or AI-assisted proposal writing. Adopt a single project management platform and require everyone (employees, subs, clients) to use it. Track which technology investments actually save time or improve close rates.
Your 2026 playbook
This month:
- Audit your last quarter’s jobs. Calculate actual gross margin by project type. Which work made money?
- Shorten bid validity to 30 days. Add escalation clauses for materials.
- Call your top three suppliers about volume commitments and price locks.
Next 60 days:
- Implement or upgrade one technology tool—estimating, CRM, or project management.
- Review your pricing. Are you buffering enough for material swings and wage increases?
- Connect with one local trade school or CTE program about a workforce pipeline.
By Q2:
- Launch a maintenance program or phased-project offering for price-sensitive homeowners.
- Cross-train at least one crew member to reduce subcontractor dependency.
- Set up contractor financing if you haven’t—it’s free to offer and removes the biggest objection to high-ticket jobs.
The bottom line
2026 rewards contractors who move, not those who wait.
Material costs won’t return to 2019 levels. Labor shortages won’t solve themselves. And homeowners will remain cautious about big commitments until you make the numbers work for them.
“Get lean, know your numbers, and protect your reputation,” Simonson advises. “Profit matters more than volume right now, and referrals are gold.”
The trends are clear: Remodeling demand is resilient, technology adoption separates winners from survivors, and the contractors who invest in their people and processes will capture share while others struggle.
Your competitors are reading the same forecasts. The question is what you’ll do about it.
Ready to close more deals in 2026? See how contractor financing through Acorn Finance helps you win jobs and get paid upfront.
