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Last Revised: 12/30/2024
Have you seen how much a new AC costs these days?
In November and December of 2023, leading residential HVAC manufacturers, including Carrier, Daikin, Lennox, Trane, Allied Air and more, revealed price increases for home AC units to be made effective in 2024.
These announcements were a clear indication that homeowners should expect to pay more for air conditioners in 2024 than they did in 2023.
This reality has complicated AC replacements for many homeowners who grapple with deciding to either purchase a new air conditioner now or delay the investment with the hopes of prices coming back down.
Mattioni has been serving homeowners for over 75 years, and we’re at the front lines of navigating these price hikes for our customers.
When it comes to prioritizing your new AC installation based on pricing, we strongly advise against waiting for one big reason: prices are only expected to further increase in 2025.
Understanding the Shifting AC Prices in 2025
The economic factors driving recent price increases are expected to persist, leading to continued cost inflation through the end of this year and into the next.
To fully understand how we got to the current AC cost landscape, here are details on recent HVAC industry-wide price increases.
In this article, we break down the major factors that are driving AC price increases in the following ways:
- Defining and Understanding Each Factor
- Exploring the Causes of Each Factor
- The 2025 Outlook and Pricing Forecast
5 Economic Factors Influencing the AC Pricing Landscape
1. Heightened Energy Regulations on AC Equipment and Refrigerants
The entire HVAC industry has undergone significant transformations in recent years amid tightening Dept. of Energy (DOE) regulations aimed at mitigating the environmental impact of AC systems.
New residential air conditioners must meet increasingly strict rules on energy efficiency, the most notable of which is elevated minimum SEER2 ratings (the metric by which the efficiency of all cooling systems is measured).
While many homeowners welcome the utility savings that come with more efficient systems, new DOE regulations have led to the integration of more sophisticated technology in widely purchased air conditioners and an overall rise in installation prices.
Transformations in the HVAC industry also extend to the production of refrigerants, as the implementation of greener options has been a top priority of lawmakers in recent years.
AC manufacturers have had to reinvent processes by which refrigerant is made, which includes heavy reinvestments in R&D and production line evolutions in their factories.
The newer, environmentally friendly refrigerant often ends up with roughly the same ongoing production costs, however the initial reinvestments to develop them are frequently a massive expense for manufacturers. These “going green” expenses are factored into prices that installation companies and consumers end up paying for code-complying refrigerants.
New regulations on refrigerants and SEER2 ratings of AC equipment have become more frequent and can only be expected to continue as the world turns to more environmentally friendly options in every industry.
2. Higher Demand for Convenient, Efficient AC Systems
As more people learn how sophisticated systems can save money on utility bills, the desire for AC equipment with leading energy efficiency and integrated convenience features has grown in recent years.
While these advanced systems lead to elevated comfort and a return on investment through energy savings at some point in the future, they come at a higher initial cost than basic models.
Convenience features of newer AC models include system health monitoring sensors, WiFi connectivity, and remote control, which all provide a thoroughly enhanced user experience. At the same time, efficiency developments like high-efficiency compressors, variable-speed motors, and improved insulation are responsible for the energy savings reflected in utility bills.
Indoor air quality products like air scrubbers and fresh air ventilators have also seen popularity growth during and after the COVID-19 pandemic as homeowners seek new ways to improve the health of their homes, adding to total installation prices.
The welcoming of these advanced AC systems from homeowners is a great development concerning the environment and long-term savings, however prices will only go up as newer technologies find their way into residential cooling equipment.
3. Shortage of Skilled Labor in the AC Manufacturing Sector
A notable shortage of skilled labor in the HVAC industry has compounded with other factors to cause AC equipment prices to rise more.
This deficit in qualified workers being felt by manufacturers means that skilled labor has become more expensive for companies like Carrier, Trane, and Lennox, which continues to influence the final price of air conditioners.
The driving force behind this shortage involves an aging workforce, fewer new industry entrants, and the complexity of modern AC systems calling for more expertise.
The HVAC industry is grappling within itself as the shortage of skilled workers continues, resulting in higher salaries for top employees i.e. increased production costs that are passed on to consumers.
Similarly, the labor shortage has also affected the HVAC installation industry as fewer AC technicians have become available to local companies. Service providers are often forced to charge higher rates for their services as they need to pay higher wages to retain skilled technicians.
4. Rising Inflation and Interest Rates Across Industries
Rising AC equipment prices have also been largely influenced by general inflation and increasing interest rates.
As inflation has risen, manufacturers have been forced to endure higher costs of doing business, meaning greater production expenses that are reflected in the equipment prices seen by consumers.
Moreover, higher interest rates raise borrowing costs both for manufacturers and homeowners, impacting investments in new equipment installations. These general economic factors add to the overall instability of AC costs now and in the future.
5. Increased Raw Material Prices Have Raised Production Costs
Prices of aluminum, copper, steel, and other raw materials surged during the COVID-19 pandemic, causing the average prices of AC equipment and other HVAC equipment to rise.
The semiconductor shortage also significantly affected production costs for air conditioning systems as compressors became much more expensive to manufacture. Supply complications also caused refrigerants to encounter price hikes as well.
Although the prices of these materials have since stabilized, manufacturers haven’t returned the price of air conditioners to normal for installation companies and homeowners.
As the global pandemic drifts further into the rearview mirror, it’s safe to say that we won’t see a corresponding price drop.
What’s Most Important when Balancing Your AC Replacement Budget?
Considering what we know about the overall trends in the HVAC industry, it’s evident how each of these five factors is individually responsible for driving up the price of a new air conditioner.
Technology advancements that have improved AC system performance and efficiency, both from forced DOE regulations and increased market demand, is only partially responsible for rising costs. Inflation, skilled labor shortages, and increases in the price of raw materials also contribute to the changing AC pricing landscape.
Home cooling systems are poised to become even more convenient and energy efficient in the future, which is a great thing for anyone concerned about our carbon footprint and environmental implications. They’re also poised to continue to become more expensive in 2025 and beyond.
For that reason, our professional advice to anyone looking to upgrade or replace their air conditioning system is to act sooner rather than later. Delaying the purchase will only make it more of a financial strain.
There are plenty of financing options available that can make the investment more affordable in the short term. At Mattioni, we make air conditioner replacement widely accessible with offerings such as a 12-month interest-free payment plan on all system installations.
To set up an in-home consultation to go over all your options regarding your next AC system, call the Mattioni team at (610) 400-8510, or schedule an appointment online.
