Residential HVAC Sales Slowdown Signals Shift Away From Replacements

For almost a decade, residential HVAC growth was driven by replacement demand. But by 2025, most of that momentum has stalled.  

What some initially thought might be a temporary blip has been showing itself more and more to be a structural shift in how homeowners are choosing to invest their money.  

According to data analyzed by Bluon, the HVAC market is staring at a sustained downturn, and contractors should be rethinking their business models.  

From a Mile Away  

According to Peter Capuciati, chairman and CEO of Bluon, the 2025 sales slowdown had been showing signs since early the year before.  

The industry is facing clear headwinds related to new equipment sales. Capuciati outlined the biggest factors:  

• New A2L refrigerant requirements in new equipment. This means new equipment is now running on the new low-GWP refrigerants, which are flammable by nature (A2L) and therefore have more safety features and technology, making the equipment materially more expensive to produce  

• SEER2 efficiency standards, which, when combined with the A2L issue, effectively make it impossible to replace half of a common split system. If your 2010 condenser breaks, you are going to have to replace the condenser and the air handler, making the cost nearly double what it would have been prior to simply replacing the condenser.  

• Warranties are becoming far less impactful. Due to the changes noted above, if your condenser breaks and is under warranty, the warranty will cover the new condenser, but not the new air handler and line sets. This means you still have to come up with $10k for a system under warranty.  This is because the warranty only covers the component, not the entire system. Even though the air handler in this example works perfectly well, you need to replace it to be compatible with A2Ls and SEER2 compliance.  

• Financing costs are way up, with much higher interest rates and more challenging underwriting.  

“With that backdrop, it's easy to see that most American households would be in no position to afford to replace a malfunctioning single component with a more comprehensive, new HVAC system,” Capuciati said. “The equipment costs would be nearly 150%, combined with a financing burden of 200% or more. That’s simply not affordable for the vast majority of Americans.”  

He added that this issue isn’t going away — even interest rates falling 150 to 200 bps would only potentially provide relief, but the new equipment costs and other issues are only getting worse, not better than before those changes.  

Anyone in the industry who’s been paying attention is well aware of the 20-40% decreases in new equipment sales for the residential market across pretty much all OEMs for 2025.  

“William Blair's HVAC Survey for 2025 highlights weaker overall demand and a shift to repairs, with prices rising due to tariffs and rebate cuts,” added Jonathan Rosenbaum, president of Bluon. “ACHR NEWS articles confirm this as a multi-quarter trend, with summer 2025 sales stalled by shortages and sticker shock, unlike brief blips in prior years. This aligns with broader economic caution, where homeowners opt for repairs on systems over 20 years old, boosting the parts market but suppressing new installs. Our customers have been telling us consistent stories for months now of new installs being down 10-30% for multiple months in a row.”  

A Higher Mix of Service Work Ahead  

When looking at longer-term sales and service patterns, Rosenbaum said the industry appears to be shifting toward a permanently higher mix of repair and maintenance over replacements, at least in the near to medium term (3-5 years), due to escalating costs and system complexity.  

“Patterns show homeowners delaying replacements amid high prices (e.g., average HVAC repair at $350, but replacements costing $11,000-$20,000), refrigerant shortages and economic pressures,” Rosenbaum said. “ACHR NEWS notes that residential sales have ‘run out of steam,’ with more opting for fixes on older units. This isn't just cyclical; regulatory changes like A2L refrigerants and efficiency mandates are making new systems more expensive and fragile, encouraging repairs.”  

For contractors feeling behind the curve right now, Bluon offered some advice on how to adjust over the next six-to-12 months without blowing up their existing business model.  

“Residential contractors need to enhance their service and repair capabilities and related price book to both have technicians capable and focused on performing profitable repair jobs, but also the job pricing to correspond to those opportunities,” Capuciati said. “Techs have been pressured for decades to push new equipment installs as their primary sales point, but now they need to alter that strategy and be able to push retrofits to bring the old equipment up in efficiency and longevity.”  

Retrofit jobs also generally produce more margin than new installs; however, they require technicians who know what they are doing.  

“This is the single biggest thing contractors can do to survive and thrive in the 2026 and beyond markets. With that in mind, they need to empower their techs with technology, support, and training to make them capable of performing repairs and retrofits with confidence and without callbacks,” Capuciati added.  

Rosenbaum suggested investing in technologies, like Bluon’s Master Mechanic feature, which enhances junior techs’ knowledge and skills, improves diagnostics and triage, and reduces errors and callbacks, driving greater efficiency among tech staff despite a tightening talent pool.  

“The competitive edge belongs to contractors who can solve problems others cannot,” Rosenbaum said. “Optimizing parts procurement and inventory management boosts success, margins, and repeat business by enabling faster, more reliable service. Efficient parts sourcing cuts job completion times and raises first-call resolution rates, directly improving profitability and customer satisfaction.”  

Getting Technicians the Tools They Need  

As noted, quick access to accurate information can make or break a business.  

Capuciati said Gen Z technicians of the current age need access to information and support that they can index, not memorize, so they can be confident they can get the technical info and/or support they need to do the job.  

“With the loss of mentors in the industry, Bluon can provide that digital mentor with its AI support platform and instant access to pretty much any information on any piece of equipment,” Capuciati said. “This index strength produces high confidence in the new technicians who simply learn and master in a different way than their predecessors.”  

Then there’s also the gap in information integration. Technicians often have access to manufacturer portals, mobile apps, and diagnostic tools, but these systems rarely communicate between each other.  

“A technician might need to consult multiple sources to understand a single system failure, creating inefficiency and potential for error,” Rosenbaum said. “This is exactly why we built Bluon as a unified platform. Instead of juggling multiple manufacturer apps, technicians get everything in one place: complete equipment specifications, diagnostic procedures, and repair guidance from a single search.”  

Parts compatibility represents another significant challenge. With equipment lifecycles extending and manufacturers frequently updating part numbers, identifying correct replacements often requires specialized knowledge that traditional resources don't provide comprehensively.  

Leaning On The Service Model  

For the contractor who feels like a service-driven revenue model is safer than chasing replacements, the question becomes how to make sure technicians are well-versed in those processes.  

For Capuciati, it is primarily a question of changing the approach and the jobs available to “sell” by the technician.  

“If the tech is instructed to sell retrofits and here are the selling value props, they will do it. In fact, technicians in general would much rather fix something than replace something; it's in their DNA,” Capuciati said. “In some ways, we are getting back to basics and simply need to remove the prior instruction of always pushing new installs, which went against the common sense of most techs.”  

In addition to the change of culture and what a contractor is selling, they also need to ensure jobs are properly priced-out in the price book they provide to their techs.  

“Contractors need to think through how they can offer different levels of repairs and retrofits that can create high margins for them, but dramatic cost reductions to the customer, when compared to new installs,” Capuciati said. “In fact, now that new installs are $20k in many cases, firms can create a full retrofit job for $8k that sounds like a bargain and still carries a super-attractive 65% margin.”  

Rosenbaum suggested that compensation structures should also align with service objectives rather than equipment sales.  

“Service-focused models reward problem-solving, customer retention, and efficiency rather than transaction volume,” Rosenbaum said.  

That means training emphasis shifts from product knowledge to diagnostic methodology and customer communication.  

“Technicians need skills in systematic troubleshooting, particularly for electronic system failures that don't follow traditional mechanical logic,” Rosenbaum said. “Our Master Mechanic AI essentially trains technicians on every service call. Instead of sending techs to expensive courses, they learn advanced diagnostic procedures in real-time while solving actual problems. It's continuous education that pays for itself immediately.”  

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