Industry conversations, whether spirited or casual, often unfold around the dinner table, sometimes around a nice glass of Sweet Tea and occasionally something a little stronger. These friendly debates among colleagues-turned-friends undoubtedly circle back to what I am hearing from others across the country and my predictions. As I reflect on those conversations and what topics get debated, a few subjects seem to always be on the list — housing starts, infrastructure funding and the newcomer, data centers — no matter if I am in California, Texas, Minnesota, Montana ... basically anywhere West of the Mississippi.
All these developments vary depending on regional growth, economic pressures and state or county decisions. When we chatted about housing starts or the lack thereof in certain states, we also wondered if infrastructure funding or commercial builds, such as data centers, would make up for the decline in housing starts.
The continued uncertainty around policy decisions, such as tariffs, generates many discussions and debates. The wild card? The growth of the demand for data centers and their potential. Let’s revisit how these factors have helped contractors plan for the upcoming season and how they have shaped the industry.
Why Housing Starts Matter
For contractors, housing starts are one of the leading indicators of future workloads. Contractors use housing as one growth marker for communities where they work and live.
- Housing starts — The number of new residential projects (single‑family and multifamily) beginning construction.
- Pipeline effect — A housing start today means months of construction work ahead, including site development, underground utilities, concrete pouring, framing and more.
- Economic effect — Housing starts are tied to population growth, household formation and consumer demand.
- Leading indicator role — Each housing start signals months of work ahead — labor, materials and services.
Housing Starts Delay
Rising interest rates, supply chain disruptions and affordability challenges slowed residential construction. High housing costs delayed first‑time buyers' decision to become a homeowner, slowing new home construction, according to the National Association of Home Builders.
Also, the bond market plays a central role in shaping mortgage rates because it reflects investors’ demand for debt securities. When investors buy bonds heavily, housing prices can rise and interest rates can decrease across the economy. When investors sell bonds, mortgage rates can increase. The bond market acts as a barometer of economic confidence and inflation expectations, directly affecting the rates of businesses and consumers’ ability to borrow money.
Late in 2025, mortgage rates slightly fluctuated due to uncertainty around price inflation, tied at least in part to questions around the price impact of tariffs on resources like steel. That said, housing starts increased in some high-demand regions like Texas and Colorado.
In 2026, housing starts will continue to face headwinds in some communities, but commercial construction will remain strong. We hope that the mortgage interest rates will decrease this year, helping to boost housing starts in communities where demand for housing has remained high despite challenges.
2026 Housing Starts Outlook: Commercial construction will remain resilient, while new home builds may rise modestly in buyer‑friendly markets.
Infrastructure Funding’s Recent History
Since 2021, spending from government agencies has fluctuated. With some projects fully funded by the Infrastructure Investment and Jobs Act (IIJA) in certain states, here’s how we can think about infrastructure projects’ funding:
- Infrastructure projects’ funding — Roads, bridges, utilities, public transit are typically funded by federal, state or local governments.
- Pipeline effect — Once funding is approved, projects are planned and executed over years, guaranteeing sustained demand for construction services.
- Economic effect — Infrastructure investment stimulates not only construction firms but also affects steel, cement and machinery availability.
- Leading indicator role — Infrastructure funding announcements can help contractors prepare bids for future workloads and plan for more labor capacity.
When contractors keep a close eye on state or county funding for infrastructure projects, they can better prepare for bidding or building cost projections. Events from last year will affect contractors’ bottom line until mid-summer of this year — especially the increased building materials costs due to tariffs on certain countries.
Let’s discuss how contractors managed increased building costs, changing policies and how we can plan for this year.
Uncertainty Remains Around Funding
After years of robust growth powered by federal infrastructure funding, the industry is shifting into a new phase marked by moderate growth and tighter margins. The IIJA is currently set to expire in 2026. As of the time of writing this article, there are no plans to extend the bill.
In addition, the 43-day government shutdown slowed potential decisions to extend federal infrastructure funding, froze contract payments and created uncertainty for contractors nationwide. The shutdown also delayed sharing certain data sets, like unemployment rates, that help to inform investors so they can define opportunities. Lastly, the federal government shutdown had a ripple effect on permit delays by state and county officials, which could cause some projects to have later start dates this year.
Now that officials are back in their offices and things are moving, certain details still largely remain opaque. It’s like that riddle that your friend shares and adamantly swears it makes logical sense, but it just doesn’t shake out for most of us. The government shutdown, plus the tariffs, will cause contractors to perhaps juggle changing project start dates, funding uncertainty, and increased costs in the immediate future.
2026 Infrastructure Funding Outlook: Contractors can expect moderate growth in transportation and energy projects, especially in regions like Texas or the Mountain West. However, cost inflation will still likely be a factor well into this summer.
The New Kid? Data Centers
Demand for data centers, semiconductor facilities and advanced manufacturing plants — fueled by the Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022 (CHIPS Act) and private investment — drives growth. Last year, data centers emerged as a rising star when thousands of builds began.
- Data center — A large, purpose-built facility containing advanced cooling systems, fire suppression, redundant power supplies, and networking infrastructure for storing, processing and distributing vast amounts of data.
- Pipeline effect — Data centers require a large area with a vast amount of energy. Contractors and subcontractors have been working together to develop sites through grading work and connecting the center to power grids like existing electrical grid, natural gas or a renewable source, e.g. solar.
- Economic effect — Many debate the effects that new data centers have on local and regional communities. When a new data center build starts, it causes significant capital injection and demand for highly skilled jobs. We will have to watch this year to see how the building of these data centers affects economies.
- Leading indicator role — Part of the commercial infrastructure that some subdivision builders have embraced until housing starts to rebound. As many of these projects have a multi-year schedule, we can expect data center builds to generate demand.
Emerging Bidding Opportunities
Contractors who would have been building subdivisions may be building data centers and other commercial facilities, which today are largely propping up the industry (though it remains to be seen how long this will last). Contractors are learning the job as project details for building power systems for data centers are still emerging.
I’ve spoken to many contractors who have decided to research data center projects and try their hand at preparing bids. Some are even watching the recent news reported by Forbes that data centers could potentially be powered by small nuclear reactors repurposed from decommissioned military ships.
2026 Data Centers Prediction: As many in tech debate whether the AI bubble exists or not, we can still expect projects that are underway to require continued development, including the power or roads around these large buildings.
Final Thoughts and What to Watch
Contractors who anticipate and prepare accordingly for challenges, whether funding, housing, or costs, will be best positioned to thrive. While we wait for policy decisions to shake out, you can consult your trusted advisors to facilitate conversations. Uncertainty remains, but here are some places I go to gather more information, so I’ll have the ammo for the next “friendly” debate. We do know that if you are not researching data center projects, you may miss an opportunity.
- Follow housing starts shared by the National Association of Home Builders.
- Follow building materials prices like steel on your preferred market tracking website.
- Watch for any further discussion on extending IIJA-funding past October 2026 through local or regional news stories and this infrastructure implementation tracking site by the National Governors Association.
- Find your trusted construction equipment and technology dealer.
