York has introduced a 92-percent-AFUE furnace, which is aimed at the new construction market.
The residential new construction market is not an area in which you would expect to see many high-end furnaces. Builders often choose the least expensive furnaces, and homebuyers are rarely, if ever, given an opportunity to upgrade their HVAC equipment.

The universal reason why better equipment isn't installed is price. Builders want to keep their costs as low as possible, and for some reason known only to them, they usually do not consider offering upgraded HVAC equipment along with the granite countertops and travertine tile floors.

Some manufacturers are starting to target this market, though, by introducing base models of higher efficiency furnaces.

Their hope is that the lower cost, better furnaces will entice builders to use more efficient equipment in new homes. Contractors remain skeptical that builders will ever change their ways, given builders' devotion to the lowest first cost possible.

York Unitary Products Group, Norman, Okla., is targeting the new construction market with its new 92-percent-AFUE furnace. This particular furnace is not a scaled-down version of another York product but was designed from scratch for the new construction market.

The reason for the new product, says Mickey Smith, marketing manager-Indoor Products, York, is that more builders today understand the value of lower operating costs, quieter operation, and better comfort - all of which can be used as selling points to the home buyer. In addition, the cost of natural gas has been rising, and builders may be more apt to choose equipment that will lower consumers' utility bills.

"New construction is a substantial market that presents a ton of opportunity," he says. "To satisfy this need, we could start with an existing, high-end product and try to ‘de-feature' it as a new-construction offering. Or, we could start from scratch and identify the needs and characteristics of a new-home furnace and build that as a baseline new construction model. We could then build on that new platform for premium, replacement market products."

York chose to do the latter, interviewing contractors, utilities, and wholesalers, to determine what types of features were needed. Smith acknowledges that it may still be a tough sell because of the pricing issue, but, he says, "We're in a retail-oriented environment. Builders need to embrace this trend and start offering options in HVAC systems just as they do with kitchen appliances and other home options. Those that do will start to see results."

A primary challenge is creating greater builder and consumer awareness about HVAC products and their benefits.

New Trend

David Meyers, vice president-Strategic Accounts, Carrier North America Residential, Indianapolis, definitely sees a new trend, in which more builders are beginning to incorporate energy-efficient design and products such as high-efficiency furnaces into new home construction.

"This is due to the convergence of several factors: Energy Star/Department of Energy awareness efforts, consumer awareness linked to the continued rise in natural gas prices, as well as increased competition among home builders," notes Meyers. "In 2003, each of the top-10 national single-family homebuilders had at least one division offering energy-efficient designs to home buyers."

Unfortunately, many builders (and their customers) remain focused on aesthetics such as carpet and cabinets and not on the many different comfort options available. In addition, builders may be concerned about homeowners qualifying for a mortgage, and they may think that the additional costs of an upgraded HVAC system could push the home out of reach financially.

"A primary challenge is creating greater builder and consumer awareness about HVAC products and their benefits. Few homebuyers will request HVAC options if they are not aware that they are available. Additionally, many builders view HVAC options as a highly technical sale and don't feel that their sales staff has the right skill set to offer these products," adds Meyers.

Another issue is that HVAC hasn't been a commonly offered option, so many builders don't view it as a potential profit center. But contractors may be able to capitalize on this concern and persuade builders to offer better equipment. Meyers says that builders successfully offering HVAC or "comfort options" can net an incremental profit of more than $1,000 per home.

"Because of the return on investment to the home buyer, these types of options often don't take the homebuyer's money away from spending on other options," notes Meyers.

Still Not Sure

Tim Murphy, owner, Smit's Heating Air Conditioning, Placerville, Calif., installs a lot of high-end equipment, but for new construction it's primarily in luxury homes.

"When you have somebody who's spending $1 million on a custom-built house, they usually want to know that they're getting a pretty good system," notes Murphy. "And the quality builders we work with have a definite concern about the product for the customer, because their reputation is on the line. We're here to take care of the customer after the house is built, and our builders know that."

Murphy says that in his area of northern California, he still sees builders constructing $700,000 or $800,000 homes and installing basic 80-percent-efficient furnaces. "Builders have a different mentality. All they're concerned with is does the system work and will it pass inspection. They're more worried about the outside appearance and not the quality of the equipment being used.

"You wouldn't believe how many people call us after a couple of years, and they're just sick of being uncomfortable. We go in and zone the house and seal up the systems and change things around, and even replace one- or two-year-old equipment. It's too bad that new homeowners are not educated enough to ask for better equipment."

Manufacturers hope that this situation is changing. "Today's homeowners are more sophisticated and more educated," says Smith. "They are looking for energy-saving appliances in general and are much more aware of the features and options available to them, and that includes HVAC systems. Builders need to integrate this thinking into their new-home offers. It's a way for them to differentiate, too, and gain a competitive advantage."

Publication date: 11/24/2003