Housing indicators paint mixed picture for 2025 HVAC demand

Replacement demand shows promise this year as existing home sales stabilize and interest rates fall — but warrants caution, HARDI economist Brian Loftus noted in a late-December email report. 

What’s happening: U.S. existing home sales, a leading indicator of equipment replacement demand, have dropped 35 percent over the past three years. 

• However, according to HARDI, they’ve bottomed — at around four million transactions.
• The rolling three-month growth rate of home sales, which indicates the direction of the annual rate, is “finally positive” for the first time since 2021, Loftus wrote in an email to Homepros. 

Additionally, listings — crucial for sales — are climbing. There are now 651,000 single-family homes for sale, nationwide — a more than 25 percent jump from the same time last year. 

The big picture: Since September, the Federal Reserve has lowered its effective interest rate three times, which many expected would trigger lower mortgage rates and boost existing home sales.

Yes, but: It hasn’t happened. The average 30-year fixed mortgage rate has risen since September and remains elevated, at nearly seven percent. 

What they’re saying: “Without lower home prices, it looks like mortgage rates need to be closer to 6% for home sales to reach 4.5 million, an increase of more than 10%, which would contribute to more [HVAC] demand,” said Loftus. 

What we’re watching: Mortgage rates, given the downstream effects on replacement demand.

• Real estate platform Redfin expects rates to hold in the high-six percent range this year, and Zillow anticipates them to fall, “but only moderately.”
• “My best guess is that [this] year is a lot like [last] year,” Christopher Mayer, a real estate professor at Columbia University’s business school, told ABC News.

Still, Lawrence Yun, chief economist of the National Association of Realtors, predicts existing home sales will rise nine percent this year, citing the increasing number of listings, among other factors.