HVAC & Plumbing Contractors NAICS 238220

Sep 9, 2025 - Air, Ground Source Heat Pumps Gain Market Share in New Homes

• Between 2000 and 2024, the share of new single-family homes that use an air or ground source heat pump for primary heating rose from 23% to 47%, according to the US Census Bureau’s Survey of Construction. Over the same period, new homes that use forced air systems for heating fell from 71% to 50%. Air or ground heat pumps are more popular in warmer parts of the country, as they can become less efficient in colder climates due to a lack of ambient heat. In 2024, air or ground heat pumps accounted for 82% of heating in new homes started in the South Atlantic region and 77% in the East South Central region. Heat pumps accounted for only 7% of heating systems for homes started in the East North Central and West North Central regions.
• New single-family home sales fell 0.6% month-over-month and were down 8.2% year-over-year in July 2025, according to the US Census Bureau. July’s total new home sales reached 652,000 units. However, home sales beat analysts’ outlook; economists polled by Reuters had expected July sales to reach only 630,000 units. The Chairman of the Federal Reserve has hinted at a possible rate cut during the central bank’s meeting in September. However, Fed rate policy will likely depend heavily on August employment and inflation data due in September. High mortgage rates continue to outpace wage growth, keeping home purchases out of reach for many would-be buyers. Some industry watchers expect new home sales to remain under pressure from interest rates through the end of the year.

• Demand for building design services dropped in July from the prior month, as architectural billings remain soft, according to a July report by the American Institute of Architects (AIA). The AIA’s Architecture Billing Index (ABI) fell to 46.2 in July from June’s reading of 46.8. Any reading of 50 or more indicates growth in architectural billings. The score for new project inquiries dropped to 53.6 in July compared to 53.6 in June, but the index for the value of new design contracts increased from 46.0 to 47.9. The AIA’s Chief Economist, Kermit Baker said, "Business conditions remain challenging for architecture firms nationwide, with billings declining across all regions in July. Client inquiries into new projects continue to build. Still, while commercial and institutional sectors show some signs of stability, the multifamily residential sector still is facing significant headwinds."
• A budget reconciliation law signed by President Trump in July includes provisions that will prompt an early sunset of tax credits for several types of residential energy efficiency improvements. The Biden-era Inflation Reduction Act (IRA) incentivized homeowners to make energy efficiency improvement, including HVAC heat pumps. The tax credits and rebates were set to be in place for 10 years, but the budget reconciliation law of 2025 ends the tax credits at the end of this year. The IRA also made permanent 179D tax deductions for energy efficiency upgrades for commercial buildings, including more efficient HVAC systems. The new law eliminates 179D tax deductions effective June 30, 2026.