The data shows this will be a great year for HVAC service and replacement. This isn’t unbridled optimism or wishful thinking. It’s data. It’s math. Let’s work through it.
Last year, in 2019, manufacturers shipped 8,470,663 air conditioners and heat pumps. Since the U.S. Census reports that there were 1.29 million housing starts, then approximately 7.2 million of these were replacement systems.
The average life of an air conditioner is 15 years. Heat pumps die a little sooner, but for simplicity, we’ll use the same product life span since we’re combining air conditioners and heat pumps.
Fifteen years ago, in 2005, 8,607,501 air conditioners and heat pumps were installed. Whoa! That’s more than 2019. In 2005, the housing market was red hot. Combined with a strong replacement market, it made 2005 the best year in the history of the air conditioning industry.
All 8.6 million air conditioners and heat pumps installed in 2005 are due for replacement this year. That alone means 1.4 million more replacements than last year.
All 8.6 million air conditioners and heat pumps installed in 2005 are due for replacement this year. That alone means 1.4 million more replacements than last year. But that’s not all.
In 2003, 6.8 million systems were shipped. The next year, in 2004, the number of systems shipped jumped to 7.4 million, a big increase of 600 thousand installations.
Remember the 15-year life cycle? If 2004 saw a 600 thousand unit jump, then 15 years later, 2019 should have seen an increase of approximately 600 thousand replacements It didn’t.
The number of installations in 2019 was only 154,670 more than 2018. That’s not the 600 thousand installation increase we expected. In fact, it was worse than that. In 2019, there was an increase in housing starts of just over 50 thousand housing units. That means the replacement market only increased by 100 thousand systems last year when history says it should have jumped 600 thousand. What gives?
Remember last summer? It showed up late. It didn’t get warm until August. Because we had a late summer, some of the expected replacements were deferred. were put off. They were pushed into the next season, from 2019 to 2020.
How much of an impact will Covid-19 have? Honestly, it can have a devastating impact vis-à-vis where the market would otherwise be and we will still see significant growth over last year if we get decent weather.
Add half a million deferred replacements from last year to the expected 1.4 million increase in replacements this year and the replacement market should grow by 1.9 million installations. Remember, 2019 ha 8.5 million installations, comprised of 7.2 million replacements and 1.3 million new construction installations.
Without taking the coronavirus into account, the data says 2020 should result in 9.1 million replacements. In other words, at the start of 2020, the replacement market was slated to grow 26%! According to the data, without taking the virus into account, if residential new construction remains even, 2020 should deliver 10.4 million installed systems.
Unfortunately, we do have to take the coronavirus into account. How much of an impact will Covid-19 have? Honestly, it can have a devastating impact vis-à-vis where the market would otherwise be and we will still see significant growth over last year if we get decent weather.
As perverse as it sounds, for HVAC service and replacement contractors, 2020 is the best year possible to be able to absorb something like the coronavirus. In fact, without it, most contractors would be unable to keep up with this year’s replacement demand.
Now is the time to get financing lined up because consumers will want it and will pay more for systems if you can offer it. Now is the time to step up your advertising and marketing because your brand needs to be top-of-mind when the heat arrives and homeowners are desperate for a contractor. Now is the time to hire the techs and installers other contractors are sending home as they turn turtle and retreat from the market, disappearing as far as homeowners are concerned.
Look, it’s math. It’s data. Even with the coronavirus, 2020 will be the best year in history for service and replacements.
This is also the year you NEED the resources of the Service Roundtable. No other organization in the industry responded as quickly or as strongly to the Covid-19 crisis as the Service Roundtable. Join today for just $50 per month at ServiceRoundtable.com, or call 877.262.3341.