Muted new home construction is keeping a lid on growth for distributors of HVAC products, and the expected interest rate cut by the Federal Reserve Bank is unlikely to provide a short-term boost.
Sales increased 6.8% in July compared to June and 3.3% compared to July 2024, according to the monthly Trends report of the Heating, Air-conditioning & Refrigeration Distributors International (HARDI) trade association.
The year-over-year growth rate “should remain near mid-single digits as the higher-cost equipment attains a larger share of the activity,” Brian Loftus, Macroeconomic and Residential Market Analyst at HARDI, tells Distribution Strategy Group.
While higher-priced equipment will boost sales in dollar terms, Loftus projects unit sales will be “subdued” for the rest of 2025. In part, that’s because he does not expect any surge in existing home sales, which create demand for HVAC systems as buyers update residential equipment. Existing home sales remain in the range of 4 million per year, after topping 5 million homes sold in each of the five years before the COVID-19 pandemic took hold in 2020, according to the National Association of Realtors.
“At the start of 2025 we were hoping that inflation would drift lower which would allow mortgage rates to do the same and provide some lift to activity levels, but inflation remains inflamed. That important demand catalyst remains dry,” Loftus says.
While the Fed is expected to lower interest rates at its meeting this month, Loftus doesn’t expect that to have much immediate impact on home sales. He says lower interest rate cuts take a while to boost demand and that mortgage rates are more tied to the interest rate on 10-year Treasury bonds than on the overnight rate banks pay, which is what is set by the Fed’s Open Market Committee.
“Watch the 10-year to see if we get a bit of a demand bump,” he says. “And that would take six months. The number of available homes for sale is very low, and affordability remains a challenge.”
Refrigerant transition impacts HVAC shipment comparisons with 2024
Shipments to HVAC distributors likely will be lower compared to last year for the remainder of 2025, Loftus says, because distributors stocked up in 2024 on equipment ahead of the January 2025 phaseout of 410A refrigerants in favor of the more environmentally friendly 454B variant.
“That does not mean the market is contracting or collapsing,” he says. “It is just steady, and the channel getting back into balance after the equipment transition.”
The 6.8% month-over-month increase in July was brought down by slower sales in the West.
“Five of our regions achieved double-digit sales growth during July 2025,” Loftus said. “The outlier was the Western region, where cooling degree days were 12% below normal this month, versus July of 2024, which had 14% more cooling degree days than normal.”
