Despite the most significant quarterly plunge in U.S. economic history, HVAC sales are booming — and not just any sales, but high-end, top-dollar residential HVAC systems in particular. It’s part of a national trend. After months of lockdown, some consumers are rushing to make the types of big-ticket items that would — in a typical downturn — be the first to get cut. In June, U.S. new-home sales reached a nearly 13-year high; sales of existing homes had their largest month-over-month gain ever. Home improvements have spiked, too. After all, if you’re going to be stuck at home, the reasoning goes, you might as well be comfortable while you’re there. HVAC, as the key to indoor comfort, has become a spending hotspot. No one wants to stay at home 24/7 with a broken air conditioner. Add the fact that proper ventilation and air filtration are critical in combatting the coronavirus, and the scene is set for contractors to sell, sell, sell all season.
Domenic DeLeo is vice president of marketing and residential installation at Isaac Heating & Air Conditioning, which serves most of western New York. His company saw the high-end trend start this spring, at the beginning of the air conditioning season.
“With people, home comfort, I think, is more top of mind,” he said. “Because of the way the weather's been, it was almost immediately — right at the end of May — when people started buying again.”
And what they were buying has changed. Not only are people buying new air conditioners, but they are buying expensive new air conditioners with all the bells and whistles. On their latest quarterly earnings call, Trane executives were asked if consumers were moving to lower-priced units, due to the rough economy and the financial impacts of the pandemic. Trane CEO Michael Lamach said the company actually saw the opposite happen, with consumers buying more higher-end units.
“That could be that a lot of people are working from home and they understand the advantage of those products,” he said.
DeLeo is watching this play out among his own customers. In the past, DeLeo said, homeowners used to get a standard 13-SEER air conditioner.
“Now we’re seeing more people go with a higher-efficiency air conditioner and a 16-SEER, 20-SEER, two-stage equipment, variable speed equipment,” he explained.
Doug Jackson, operations manager at Jackson Comfort Systems, Northfield, Ohio, has seen the same uptick in high-end sales. His company saw record growth in mid-June and into July, especially through indoor air quality products, and the replacement market is up 25 percent from last year at the same time.
“We’ve seen that they're actually buying even more high-end stuff, and I think the reason for that is, people have more disposable income than they did before,” he said. “They’ve had to cancel all their vacations, they’re putting off going to restaurants, so they’ve got all kinds of disposable income that they want to spend somewhere.”
And since the only “somewhere” to go has been home, people are fixing up their houses — making repairs like new roofs and adding comforts like decks, pools, and improved HVAC.
“People are home more, and what that's really what we're attributing it to,” Jackson said. “Pools around us — they're sold out for like four months, right now. Air conditioners — they're sold out forever.”
In addition to residential and commercial HVAC, Isaac Heating & Air Conditioning also offers insulation, electrical, plumbing, and a new sanitizing service, complete with a product that will kill viruses in indoor environments.
DeLeo said that “anybody who does home services right now is busy.” Pool companies are booked through October of 2021, he reported. DeLeo’s company has had at least a third more sales than normal in July.
“It’s been unbelievable,” he said. “People are wanting to spend.”
Savvy contractors can facilitate that spending by offering pricing bundles, as Salazar is doing — for example, selling home IAQ products along with a new high-efficiency air conditioner, which has had the effect of turning $5,000 sales into $30,000 sales.
DeLeo, too, is seeing IAQ products becoming less of an add-on and more of something people get automatically with their system.
“We're seeing more and more of it,” he said. “People are more concerned about that.”
A Cycle of Home Improvement
DeLeo saw this same trend — homeowners investing in their homes, despite an economic downturn — in 2008-2009, during the Great Recession.
“I think that more people are home and they're investing in their house and they've got more money to spend because they're not taking trips and things like that,” he said. “In 2008, it was the same thing: People started to spend more money in the house. I think they feel like their house is their safest investment.
“Here, the housing market has gone through the roof — it's a seller's market right now,” he added. “So I think as people see that and they see the price of the house, they feel more comfortable investing in it.”
While high-end HVAC sales are obviously great for the industry, it’s good for customers, too, DeLeo said.
“A lot of times, the high-end equipment has got more features that people didn't even really know about,” he said. “So they're asking about it more; they're educated themselves, and they end up with a more comfortable house at the end of the day. And typically when they go high-end, it's not bells and whistles like a car. The higher end is typically tied directly into the comfort; they're going to be happier at the end of it.”
As contractors get even better at explaining the benefits of higher-end equipment, customers who are open to it will start to hear about it from their friends and family, generating more interest, DeLeo predicted.
“It’s going to continue,” he said. “Is it going to stay like it is? No — but every time something like this happens, it shifts the market a little bit, so [sales] with the higher-end equipment, I would say, will be more consistent.”
With more consumers wanting to improve their comfort while working from home and little else to spend their money on, Robert Sharp, executive president of Emerson Commercial & Residential Solutions, predicted that high-end sales will be solid for the near future.
“You’ve got a lot of people sitting at home and sitting on a pretty significant pile of cash,” he said during the company’s quarterly earnings call. “I don’t see any reason why this won’t continue through the season.”