What to do about a default on a construction contract after materials have been purchased?

You may enforce the signed contract as written. If it doesn't give the customer the right to terminate (e.g. on notice; at certain stages; by paying some sum as a termination or cancellation fee; etc.), you could sue him for the full amount due under the contract, less any offsetting savings of yours from nonperformance (e.g. any labor savings; basically, you sue for the profit due under the contract), as well as less any amounts you've already received. Or rather: that's what you're entitled to, since you have to mitigage losses and apply any savings--but ieave it to the customer and/or the court to bring that up. Simply sue him for what he's supposed to pay you, less the deposit, which you should be entitled to keep.