The Residential HVAC Market Is Heating Up

A “heat pump craze,” tax incentives for installing energy-efficient HVAC solutions and upselling indoor air quality features to combat allergies are just a few of the residential market demands David Giacalone is fielding from customers of Veterans HVAC / Potter Heating, Cooling & Plumbing Co. in Canandaigua, New York.

“Energy efficiency is so common and widely talked about now that it’s almost an expectation at this point,” says Giacalone, who was an HVAC mechanic for 18 years before buying the business and has three decades of industry experience. 

“If you offer lower-end systems, customers are almost taken aback now,” he adds. “The conversation is more about, ‘Which version of the higher-efficiency system do you want?’ And that approach has been successful. We find that most people are willing to pay for upgraded efficiency, especially when you lay out the potential tax incentives.”

Giacalone’s observations align with a 2024 Residential HVAC Market report by the research firm Arizton Advisory & Intelligence. Overall, the report reveals the residential HVAC market was valued at $16.43 billion in 2023 and is projected to reach $19.88 billion by 2029 for a compound annual growth rate (CAGR) of 3.23%. Driving this growth are changing and diverse climatic conditions, population increase, urbanization and a focus on energy-efficient and comfortable living spaces. 

Not to mention, regulatory pressure to reduce or eliminate the use of fossil fuels is driving system replacements — as is the across-the-board sunset of refrigerant R-410a, Giacalone points out. 

“While this will take training, the positive is that older equipment with refrigerant issues, whether leaks or contamination, the cost effectiveness to repair vs. replace will be much more on the replacement side,” he says, expecting mounting refrigerant costs, in general, to drive system replacement work. 

Energy-Smart Solutions 
According to the report, the heating equipment segment acquired 40.92% of the U.S. HVAC market share, followed by air conditioner and ventilation equipment. Namely, an increase in energy-efficient heat pump installation as an alternative to conventional furnaces reflects an industry trend toward environmentally sustainable solutions. 

Giacalone says heat pumps are a major selling point for his business, with an average close rate of 40%. “And it’s a bigger ticket item, which drives revenue,” he points out. 

Also, Giacalone says his business has been installing duct lift heat pumps and split system ducted heat pumps. “More recently, the split system style heat pump is becoming a big selling point for us,” he says. “People call for air conditioning and we offer them the heat pump solution.”
Similarly, the report calls out a rising market demand for energy-efficient air conditioning systems. While the forecasted CAGR in this segment is 4.61%, air conditioning demand tends to fluctuate on a seasonal basis. 

Advanced control features such as programmable timers are also a customer expectation, the report notes, also highlighting how modern systems offer heating and cooling capabilities for year-round comfort. 

As for comfort, Giacalone says a big push for his business this year and going forward is indoor air quality (IAQ) systems that include UV lights to remove mold spores that can grow on coils. “We have ionization technology that changes the structure of the air ions and makes them fatter so the filtration catches more dirt and debris — a multipronged approach to a full home pure air system,” he says. 

Customers are on board. 
“We get calls for just that,” Giacalone says. 

Regulation-Driven HVAC Replacements
Federal and state-level incentives and regulations are playing a major role in reshaping the residential HVAC market. The country has strengthened its 2030 greenhouse gas emissions objectives. Concurrently, there are significant evolutions in decarbonization, electrification and refrigerant requirements, the report shows.

More than ever, HVAC business owners and account managers are charged with explaining complicated tax incentives and rebate programs to clients to inform buying decisions.

“New York has a lot of local and statewide incentives with the New York State Clean Heat Initiative that offers a substantial rebate to homeowners—up to $5,000 on a full system replacement,” Giacalone says. “Some of the ductless jobs can go for $30,000, but $5,000 is a nice tick off of that.”
Back to the rise of heat pump sales and push toward electrification, Giacalone expects the fossil fuel world to eventually “go away,” he says. His state will not allow natural gas lines in new buildings beginning in 2030. “They are going to shut that right off,” he says. 

This requires an industry mindset shift, yet affords opportunity in the residential HVAC market. 

“You can get the full rebate if you go for an electrification system and decommission the fossil fuel, so they take the gas line out of the house or disconnect and cap it,” Giacalone says. 

His business is leveraging social media and marketing to educate consumers about efficient systems and upgrades such as IAQ solutions. 

Aligning with the overall HVAC residential market growth, Giacalone says his business has tripled in size since he acquired it, and he expects continued demand. What’s coming down the pike? He quips: “More of the same.”