Financing applications for repairs jump 37% in 2024, report finds

HARDI last week published its annual ‘State of the Channel’ industry report, including over 300 pages of industry trends and data, along with survey responses from over 1,000 contractors nationwide. 

A few takeaways, in the second of a two-part series:

Consumer financing trends shifted in 2024

According to data from FTL Finance, financing applications for HVAC replacements rose 30 percent from January 2022 to January 2023, while applications for service work increased by 10 percent. 

Over the following 23 months, through December 2024, “applications for equipment traced a steady downward path, finishing 2024 seven percent below its level from one year prior,” the report says. On the other hand, service work applications jumped 37 percent during the same period, pointing to a clear shift toward “higher levels of repair work,” it adds. 

Additionally, regardless of the type of work, 32 percent of contractors cited approval rates as their biggest challenge with financing today.

M&A volume has slowed — but a pick-up is expected

In 2024, total M&A volume (including contractors and distributors) was down 25 percent from 2021, according to the report. While the slowdown was driven by several factors, including election uncertainty, “high interest rates were the most important factor,” it notes. 

However, the general sentiment for this year is that deal activity will pick up, partly due to the new administration and elevated levels of “dry powder” among U.S. private equity firms — which sat at roughly $900 billion as of 2023, per the report — alongside other factors. 

Separately, the report highlights the outperformance of HVAC suppliers’ stock prices compared to the S&P 500 over the past five years. Carrier, Trane, and Watsco have each seen their stock prices increase by over 300 percent during the period, while the S&P 500 has increased by roughly 150 percent. 

Housing activity paints a mixed picture for HVAC demand 

While not a perfect relationship, HVAC replacement demand has historically correlated with the level of existing home sale transactions. From 2020 to 2022 — the “free money era” of low interest rates, stimulus checks, and increased time at home — existing home sales jumped and residential improvement spending grew 20 percent a year, fueling strong replacement demand. 

However, as mortgage rates — which currently hover around six percent — have risen, growth in existing home sales has stalled and residential improvement spending has fallen, contributing to a 17 percent decline in HVAC shipments in 2023. 

While replacement demand rebounded slightly in 2024, with shipments growing 12 percent, “the industry finds itself in a holding pattern,” the report notes. “The market’s ultimate growth potential will remain limited until mortgage rates fall to a level more in line with the rates of outstanding mortgages.”

Most contractors posted revenue growth last year

A few other notable takeaways from HARDI’s ‘Voice of Contractor’ survey, which encompasses over 1,000 contractors nationwide:

• ‘Product availability’ and ‘pricing’ remain the top two factors when selecting distributors, which has remained steady since the survey’s inception, HARDI’s Tim Fisher tells Homepros. 
• Most contractors (62 percent) saw positive year-over-year revenue growth in 2024. 
• 38 percent of respondents are purchasing ‘more products’ from online marketplaces compared to five years ago. 
• While 45 percent of contractors maintained their existing sales mix, 30 percent sold more ‘premium’ equipment in 2024, and 25 percent sold more ‘value brand’ equipment. 
• And despite last year’s economic uncertainty, the vast majority (81 percent) noted their replacement sales still occur via cash, checks, or credit cards.

See Part One