Twice a year, Honeywell provides an “Economic Outlook” from of its Home and Buildings Control Division. The company’s experience as a provider of controls to equipment manufacturers and to the aftermarket gives it a unique insight into the dynamics of the market.

“The large volumes of equipment installed in the housing booms of the 1970s and 1980s are increasingly at risk of failure, and significant replacement opportunities are expected to support high levels of heating-cooling equipment shipments over the long term,” the report says.

While the global markets remain soft, the domestic economy remains almost implausibly strong, with miniscule unemployment, inflation held in check, and interest rates relatively low.

Here is a summary of some elements of its forecast, issued earlier this year and based on a variety of variables.

Nonresidential: Investment in buildings remained steady last year, with gains in commercial buildings and sustained recovery that began in 1994, following a prolonged slump.

Office vacancy rates have dipped, suggesting a demand for new office space in downtown and suburban markets. Spending on office construction is expected to advance 8% in real terms. However, hotel-motel spending is beginning to dip thanks to declining tourism from Asian countries.

Another troublesome sector is shopping centers, restaurants, and service buildings, where spending was off 5% last year, and expected to be sluggish this year. Likewise, educational building construction was flat in 1998, after five good years.

Housing: The report cites last year’s “arrival of the most affordable mortgages in the U.S. in a generation, which encouraged record levels of home sales and the best housing construction rates in 11 years.”

Home ownership is now at a record 66% of households, which promoted 1.6 million housing starts. Single-family home construction grew 8% to over 1.2 million units last, the best performance since 1978.

The report predicts an up-and-down pattern for housing starts, with 1.475 million this year, followed by a five-year decline through 2004. This is due to homebuilders satisfying the pent-up demand.

Hardest hit will be multifamily units, averaging about 290,000, down from an average of 307,000 units during the past five years. However, adding manufactured homes to the mix will add about 300,000 units a year to 2004, bulking up the intake of hvac units.

Equipment going in

Unitary equipmentgoing into new single-family homes (see chart) will total 970,000 units, to be followed by a three-year dip, sliding by 20% in 2002, with a two-year recovery to 946,000 units in 2004.

However this will be more than offset by replacement-upgrade unitary shipments, which are measured in the 2.4 million-plus range.

Unitary shipments to new multifamily housing units show approximately the same pattern as for single-family, but the dip won’t be as steep, and the recovery in 2004 will exceed the beginning point of 1999.

Shipments of furnaces (both new construction and replacement) are expected to be relatively stable for the next six years.