Housing market has muted impact on 2025 HVAC demand

The housing market has been no help to the HVAC industry this year: U.S. sales of existing homes have remained relatively flat since January, compared to last year, and in May fell to their slowest pace for the month since 2009, according to national housing data released Monday. 

Why it matters: Existing home sales serve as a proxy for replacement demand, as home purchases have historically driven increased consumer spending on improvements in the first year after buying. 

State of play: From January to May, nationwide existing home sales hovered around an average annualized rate of just over four million, down two percent from the same period last year, according to the National Association of Realtors — and down 33 percent from 2021.  

• “The relatively subdued sales are largely due to persistently high mortgage rates,” said Lawrence Yun, the association’s chief economist, on Monday.  

Golden handcuffs: High mortgage rates — particularly the 30-year fixed rate, which has bounced between six and eight percent since 2023 — have created a lock-in effect, as those who bought homes in 2020 and 2021, when rates sat around three percent, are reluctant to sell. 

But, but, but: The tide may be turning, as there were 1.54 million U.S. homes for sale or under contract at the end of May, a 20 percent increase from May 2024, which builds on an 18 percent increase from the year prior.

• Meanwhile, though still near record highs, home prices are growing more slowly, with April — the latest available data, published Tuesday — seeing the slowest appreciation in nearly two years. 

What to watch: Mortgage rates heavily influence home sales trends and typically follow the direction of the 10-year treasury yield, which has fallen six percent since January 1.

• “If mortgage rates decrease in the second half of this year, expect home sales across the country to increase due to strong income growth, healthy inventory, and a record-high number of jobs,” Yun added.