Contractors predict positive outcome for HVAC construction market
Fortune tellers had it easy. They simply gazed into a crystal ball or studied someone’s palm to figure out what the future held. But when it comes to the collective fortunes of the HVAC and sheet metal industry, it’s not so clear. Industry-specific information is hard to come by, and few soothsayers specialize in predictions for the construction market.
Nevertheless, Snips is giving it our best try. We have compiled what data we could find, along with interviews with some of the associations that represent different segments of the heating and cooling industry.
The opinions vary, but many of the people we talked to seemed to believe 2014 will be a pretty good year, even if it doesn’t compare to the heady days of the early 2000s.
As president of the Sheet Metal and Air-Conditioning Contractors’ National Association for the past year, Howard Stine had plenty of time to talk to members about the economy in general and their businesses in particular.
A sheet metal perspective
The executive vice president at Charles E. Jarrell Contracting Co. Inc. in Earth City, Mo., said his year as SMACNA’s head taught him that there are major regional differences when it comes to the economic health of member companies.
“I would say probably it is a slow recovery,” he said. “In St. Louis, we’ve bounced back. We’re down to almost 10 percent unemployment on the sheet metal side and we’re busy in education and health care and some specialty work. Jerrell is in those markets, along with renovation work, which is coming back strongly.”
Parts of California and Great Plains states such as Oklahoma also seem to be doing well, he added.
“Overall, I’d say it’s a slow process, but it’s moving toward improvement,” he said.
The U.S. housing market is certainly seeing improvement, according to economists with the National Association of Home Builders. In most of the country, home prices have been rising at the best clip in years, with some markets considered “normal” by the group’s experts.
Nationwide, the housing market is operating at 85 percent of its usual level, based on historical data, the NAHB says. That gap should close further within the next two years.
“The cards are in play for a decent and fairly strong recovery in 2014 and particularly in 2015,” said David Crowe, the association’s chief economist. “From the standpoint of GDP (gross domestic product) growth, housing has been a plus, growing at two, three and four times the rate of the rest of the economy in recent quarters.”
Overall, home prices increased by double digits during 2013, thanks to low levels of move-in-ready houses available and a falling unemployment rate.
“We expect to see price increases moderate in the next few years as we see additional inventory on the market and investors back away as the bargains disappear,” Crowe said.
Another trend that may benefit residential HVAC contractors is that U.S. households are increasing their saving rates and eliminating debt. That may make it easier to sell — and finance — homeowners on a new HVAC system purchase.
“They’ve corrected a lot of excesses and feel more comfortable about moving forward,” Crowe said.
The NAHB’s findings echo what many Air Conditioning Contractors of America say they are feeling, according to the group’s recent Contractor Comfort Index studies. The index, which measures members’ feelings on the prospects for economic growth in the near term, is the result of monthly surveys. ACCA members are asked how they feel about business prospects, existing activity and staffing levels.
The results are turned into a number from one to 100. Anything about 50 mean most contractors anticipate an increase in business, with higher numbers indicating greater confidence.
For most of 2013, the index was the highest it has ever been, reaching a high of 77 this summer.
And that’s reflected in what said current ACCA Chairman Bobby Ring said he is finding in his conversations with other members.
“I hear nothing but good things,” Ring said. “Everyone has continued to have a very strong year and talking very positive about the future despite what goes on in the economy and the government.”
Ring is the president and chief executive at New Jersey-based Meyer & Depew Co. At his company, things really couldn’t be better, he said.
“My company is having the best year in the history of the company. Things are up substantially, over 30 percent,” he said. “We’re firing on all cylinders.”
At Meyer & Depew, Ring credits the hiring of high-caliber salespeople and a major increase in the number customers buying whole-house generators after having their power knocked out by Hurricane Sandy. The company did more than $2 million in generator sales during 2013, Ring said.
Homeowners seem to be in a buying mood, he added.
“There are houses being built again. We haven’t seen that in many years,” Ring said. “I also think that consumers in general, when they hear positive economic news, it improves their confidence in their particular situation.”
For reprints of this article, contact Renee Schuett at (248) 786-1661 or email email@example.com.