The residential construction sector is facing mounting pressures in 2026, driven by rising costs, slowing market activity and outdated building practices, according to contractor and television host Mike Holmes.
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In a recent industry commentary, Holmes outlined a range of challenges affecting builders, contractors and homeowners across North America, emphasizing that the issues extend beyond interest rates and housing supply.
“Today, residential construction is under pressure from every direction,” Holmes said. “Rising costs, slower sales, shifting homeowner priorities, and outdated ways of thinking have created an industry that feels stuck.”
Holmes pointed to escalating construction costs as a primary concern, citing factors such as tariffs, volatile material pricing, transportation expenses and ongoing labor shortages. These conditions have made it increasingly difficult for contractors to estimate project costs accurately and maintain profitability.
“Across North America, residential construction has slowed significantly,” Holmes said, noting that higher costs are impacting both builders and homeowners.
For contractors, tighter margins and increased financial risk are becoming the norm. Meanwhile, homeowners are facing higher prices, project delays and, in many cases, scaled-back renovation or building plans. The slowdown in home buying and selling has further reduced demand, creating a ripple effect throughout the construction industry.
Despite these challenges, Holmes suggested that a slower market may present opportunities for improvement.
“A slow market isn’t always a bad thing,” he said, adding that reduced demand allows contractors to focus on hiring skilled workers, refining processes and improving overall quality.
Another key issue highlighted by Holmes is how homeowners allocate construction budgets. He noted that many prioritize visible design features such as finishes and fixtures over critical structural and performance-related components.
“The value and importance of the building envelope should never be overlooked,” Holmes said, stressing the importance of insulation, drainage systems, air barriers and structural integrity.
He warned that cutting corners on these essential elements can lead to long-term problems, including moisture intrusion, energy inefficiency and costly repairs.
“Short-term decisions, long-term consequences,” Holmes said, emphasizing that investing in durability and performance is essential for long-lasting homes.
Holmes also identified a lack of homeowner education as a major gap in the industry. Many clients, he said, are unaware of how homes function as integrated systems, leading to decisions that prioritize aesthetics over performance.
“Many homeowners aren’t ignoring these issues on purpose—they simply don’t know,” he explained, calling on construction professionals to take a more active role in educating clients.
The commentary further underscores the importance of building not just individual homes, but resilient communities. Holmes emphasized smarter planning around environmental factors such as stormwater management and groundwater usage to create sustainable neighborhoods.
“What’s really holding back residential construction today isn’t a single issue—it’s a combination of habits, priorities, and outdated assumptions,” Holmes said.
He concluded that the current market conditions offer an opportunity for the industry to refocus on quality, durability and long-term value.
“An opportunity to build fewer homes—but build them better.”
Originally reported by Mike Holmes in Make It Right.
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