The HVAC Industry Continues to Experience the Effects of COVID-19

HVAC and covid 19 Featured image

HVAC Supply Pricing Continuing To Rise

Folks who purchased their new AC system at the beginning of the year should be singing their praises.  The industry continues to see rising costs of materials combined with a shortage of workers.  

A colleague of mine said, “When something like COVID interrupts any part of the supply chain system, including how those parts get shipped from there to here. We’re experiencing a weird dynamic right now with worldwide stress, but also with a high demand for our products and services. Also, considering the low numbers of employees working in these factories, the only thing to expect is chaos. The scenario is creating an almost panic for our industry to perform.”

Halfway through the summer of 2021, things haven’t gotten any better.  We continue to be frustrated.  Selling equipment is tough enough, but to get the okay from a customer and potentially not have their equipment is challenging.  It’s the toughest thing I’ve had to deal with since becoming a contractor in 2015.

What happens is, when we order our equipment online in the past, we could see the inventory levels of our distributor.  We would look up a particular furnace that matches up with a condenser and evaporator coil and see that they had 20 of those furnaces.  Now when we win a job, we have to submit the order and wait for the distributor to get back to us and let us know if they have the equipment to fill that order.  If they don’t, we have to call the customer back and let them know.

On a few occasions this year, we have had to offer the customer an entirely different brand than Trane, which has always been our equipment of choice.  This has worked out for those customers, and we appreciate them being flexible enough to understand.  

Every HVAC contractor in the United States is dealing with this equipment situation.  Manufacturers say they can’t get equipment out fast enough for the rising demand for new equipment.  This has created the highest rate of price increase we’ve seen in a very long time.  Each year, we typically see a 4% to 6% increase in the cost of equipment.  

attic furnace unit

This year we’ve already seen a 21% increase in that same equipment. This has resulted in your basic $10,000 HVAC system increasing by $2,000 in just one year.  Higher-end equipment has grown exponentially.

With a few to several more months of rapid inflation in the world’s economy, we continue to brace for whatever price increases we may see. These price increases ultimately get passed along to our customers. 

So, like we said this time last year, as we’re getting close to the end of the hottest time of the year, local suppliers should have an easier time restocking their shelves as demand goes down.  Winter months are relatively mild around the Sacramento Valley, so that we won’t get that high intensity of equipment change-outs experienced in other areas of the world with longer, colder winters.

Let’s keep our fingers crossed America get’s back to normal soon.  People need heating and air conditioning. It’s not a luxury for some people.  With continued demand and lower inventory of equipment and the parts that make that equipment up, inflation continues, stressing this contractor out.  

Stay safe and follow CDC guidelines so we can get through this sooner than later. Thanks so much for stopping by, and we’ll see you next time.

Where Should HVAC Technicians Wisely Invest Their Money?

Where Should HVAC Techs Invest

Blue-collar workers like HVAC technicians may not be the first people you would think of as savvy stock market investors. As a company owner, I provide our workers with a Simple IRA that acts much like a 401K. We match a certain percentage of their contribution to their retirement account. In that account, they are encouraged to invest their money in a variety of stocks or ETF’s.  These options can help them gain some free money in the form of capital gains.  The stock market has, on average, provided more interest than leaving an employee’s money sitting in their account, gaining no interest — not even the 1% to 3% a traditional bank would generate for their customers.

Buying Shares in Familiar Companies

Warren Buffet, Benjamin Graham, and Peter Lynch are some of the greatest investors of all time. Their advice when it comes to investing is to invest in what you know.  Should HVAC technicians focus on investing in banks and biotechnology? Probably not. But a technician would have great insider information on the HVAC industry. Trane, Lennox, Carrier, Daiken, Johnson Controls, Honeywell, AAON, Comfort Systems, Watsco, Mitsubishi Electric, and Fujitsu are all very popular names in our industry.

HVAC Equipment Shortages

The pulse of the industry is like second nature to HVAC technicians.  As I write this at the end of a very busy summer and hopefully near the end of the COVID-19 crisis, insiders know there is an unprecedented and vast shortage of HVAC equipment and parts.  Raw materials, control boards, compressors, switches, copper, aluminum, sheet metal, and everything else that goes into an air conditioner or furnace are slow in getting to manufacturers. 

Companies like Trane, Lennox, Carrier, Ruud, Goodman, among others, are being delayed.  Some delays are not necessarily due to temporarily closed factories, worker layoffs, or everything else COVID-19 has brought with it.  Snags in transportation or the receiving docks receiving those deliveries also affect the process.  Delays persist.

How do all these factors affect stock prices now? How will they affect stock prices moving forward into 2021 and 2022? And how is the industry growing in general? These are questions HVAC technicians and other industry experts are much more likely to know the answers to than biotech experts. Therefore, it’s important we blue-collar experts invest in what we know. Should we be investing in pharma stocks that might create the vaccine for the COVID virus?  Not if the only thing we know about it is what we’ve seen on TV.

HVAC Market Demand in 2021

Commercial and industrial HVAC companies can tell you that 2020 saw a significant slowdown in certain sectors of the buildings where they service and replace equipment. Data centers, health care, and warehouses remained a reliable source of work. But retail stores, hospitality, and restaurants suddenly became incredibly soft markets. All the major HVAC manufacturers like Watsco, Johnson Controls, Trane, Carrier, and Lennox expected the softness now seen in the light commercial segment. It will create some pent-up demand going into 2021. That is good for earnings for these publicly traded companies, and who better to gain from it than our own industry experts?

COVID-19 is Inspiring Home Improvements

In an earlier post last month, I discussed what happened to those of us in the residential HVAC market. There’s been a demand for equipment changeouts, unlike anything we have seen. What was happening? Those workers directed to work from home started investing in their homes. Hardware stores, gardeners, construction crews, and HVAC companies all started working harder than ever before! I cannot think of one contractor I have talked to that did not smash sales records this past summer.

The Working From Home Trend

Homeowners found they had more disposable income to work on their homes since vacationing and going out to the movies was not going to be happening anytime soon. When offices begin opening again, the commercial sector will see a rise in sales. That is good for stock owners. I think a little over half of those working from home will remain working from home. And they will continue sprucing up their homes to ensure a comfortable workspace. But we as HVAC technicians already know that. Therefore, investing our hard-earned retirement money in something we know follows the advice of a few of the greatest investors of all time:  investing in what we know.

Getting Started

Give it a shot! You don’t have to be a super slick Wall Street investor to be invited to the party. Apps on your phone will let you buy shares of stock one at a time. I personally have my IRA and another account on Robinhood, which takes no extra fees for me to invest my money through them. If I only have a hundred dollars to throw into my account that week, I can purchase $100 of a $275 share of Lennox. It all builds up over time, and the younger you start, the sooner you will have enough money in your retirement fund to support you when your knees finally go out.

Invest in Companies You Know

Instead of letting your money sit in an account making no money beyond what you put in there, invest in some of these companies, companies you already know well enough to know that they make good profits every year. This industry will only increase in size every year due to technology upgrades, population growth, and new homes being built further out into suburbia, to name a few.

Thanks so much for stopping by and we’ll see you on the next blog.

HVAC Equipment Shortages Due To COVID-19 Pandemic Create Chaos

HVAC equipment shortage

There’s a significant shortage of HVAC equipment needed to replace our customers’ current systems.  In some areas, if you were to sell a new system to a family, there’s a chance that order with your distributor can’t be completely fulfilled.  And I’m going to talk about why.

Nobody thought in March or April of 2020 when we were all sitting at home following Stay At Home orders that our industry, primarily residential HVAC, would see a 30% to 60% uptick in business through the summer months of 2020.

May, June and July were months that our company, as well as almost every other contractor I’ve talked to, saw record sales, especially in the equipment replacement area.  I’ve talked to some contractors in other parts of the country that haven’t seen this increase in sales, but it’s been few and far between.

To get some answers as to why this shortage has occurred, I asked a couple of industry professionals in my area to give me their thoughts.  I wanted to know what other contractors are doing about it, and when we can expect our warehouses to get back to normal levels of equipment inventory.

Why has the HVAC Equipment Shortage Occurred?

COVID-19 affected all manufacturers in one way or another.  Some manufacturers were hit earlier than others due to outbreaks in their facilities, forcing them to abide by CDC regulations and shut down for two weeks at a time.  It slowed down production to a near halt.

One industry professional told me, “Everyone felt the effects when the raw materials used to build our equipment became unavailable.  Theses included things like control boards from India, motors, and controls from China, raw steel, raw aluminum, and copper from various parts of the world.”

“When something like COVID interrupts any part of the supply chain system, including how those parts get shipped from there to here, and the number of employees working in these factories, the only thing to expect is chaos. We’re experiencing a weird dynamic right now with worldwide stress, but also with a high demand for our products and services.  The scenario is creating an almost panic for our industry to perform.”

What Are Contractors Doing Since Their Equipment Isn’t Available?

HVAC contractors, large and small, whose usual brand of equipment ran out, were forced to go to other stores and find anything they could get their hands on.  That created an even higher demand for equipment from our local suppliers.  So, while the sales were good for them, almost every supplier felt the squeeze, eventually getting to the point where they were out of product, which usually lasts a lot longer.

Another industry professional told me, “At first it seemed like a lot of contractors became extremely frustrated with the lack of inventory, especially since a lot of the jobs were already sold and they needed the equipment quickly.  But as time went on and EVERY supply house was having the same issue, it became apparent to us contractors that it wasn’t because these supply houses weren’t watching their inventory close enough, and restocking accordingly.  It was a bigger problem all around.”

When Will Things Get Back to Normal?

Equipment manufacturers are not and can not give us ETAs as to when equipment will be back to normal levels.  The demand for products and services in this area has outpaced the manufacturer’s ability to build, produce, and ship out inventory.

Some manufacturers are saying October, but that would be if no new setbacks occur from closures caused by another increase in COVID cases.  And in a time where new issues seem to arise from this pandemic every week, and with no dependable vaccine ready to go by the end of 2020, it’s tough to tell when the HVAC equipment shortage will end.

Fortunately, in California, we’re getting close to the end of the hottest time of the year, so local suppliers should have an easier time restocking their shelves as demand goes down.  Winter months are relatively mild around the Sacramento Valley, so we won’t get that high intensity of equipment change-outs experienced in other areas of the world with longer, colder winters.

Stay safe and follow CDC guidelines so we can get through this sooner than later.

Thanks so much for stopping by, and we’ll see you next time.

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Why the HVAC Industry is Thriving During the COVID-19 Pandemic

During the COVID-19 pandemic, many contractors have enjoyed record sales. Why did the HVAC industry thrive while other sectors were so negatively impacted?

 

When COVID 19 hit this year, I’ve got to tell you; I thought our industry, just like so many others, was doomed to an economic downturn.  Small businesses were hit the hardest here in the Sacramento Valley. I can’t tell you how sad I felt for these folks who’ve worked so hard to get where they were in early 2020, only to have the worldwide pandemic ruin their hopes, dreams, and pocketbooks.  So why did the HVAC industry do so well this year when other sectors were hit so hard? That’s what I want to talk about today on the blog.

The pandemic hit Californians in early March.  2020 started better than usual for us, and I was feeling very positive about us meeting our financial goals again this year.  Then, it hit.  The states began shutting down public places.  Players were walking off the court in the middle of NBA basketball games.  These were truly unprecedented actions that today’s population has never seen.

California’s lockdown began on March 19. Fox Family continued to gain revenue through the first two weeks of that month.  As an essential service, because people can die from a lack of regulated, conditioned air in their homes, we were able to keep our staff working.  But the stay at home order during the latter half of March and all of April created a situation where most people found themselves sitting around the house, not doing much.    

Then the Work Began for the HVAC Industry 

May saw more people than ever begin to work on their homes.  Gardening, redoing their concrete sidewalks, inserting pools in their backyards, getting that electrical work done, and many other items popped up on people’s To-Do Lists.  And like every year around that time, people started either getting AC repairs done from the previous season or straight-up changing out their whole system.

Payroll Protection During COVID-19

Not only did Fox Family avoid laying off anyone at our company, but with the payroll protection program, we were able to keep money in their bank accounts so they could pay their bills.  As a business owner, I honestly have great concern for the welfare of my employees.  We even paid a couple of our employees’ rent for the month and would have continued had our business not started up again as it did.

Why did the HVAC Industry see a Rise in Business During COVID-19? 

It all comes down to people being cooped up in their homes for months, not being allowed to go out except for essential needs like groceries.  People who even wanted to go out found there weren’t too many places even open.  So they had more disposable income than in previous years.

Our industry boomed when others were scrambling to find the money to pay their lease at brick and mortar stores—about 30 percent more.  And while many people just got simple repairs done, a massive wave of people started changing out their whole system.

Staying Home

Because people weren’t going on vacation, going out to the movies, and all the other things people do in ordinary life, their money was applied toward fixing up their homes.  As the world started lifting restrictions, another wave of increased COVID cases hit, closing restaurants and retail stores that had just reopened their doors to the public. 

Business usually starts to slow down for us towards the end of August because people see the end of 100-degree temperatures on the horizon.  Many people feel like if they’ve made it this long without AC, they can go a few more weeks without it before nicer weather settles in.  People who have looming repairs on their systems say they’ll hold off until next spring to make their repairs.

Time Will Tell

So, we’ll see how the summer season finishes up. Will people continue to use their discretionary spending money on preparing for the winter months?  Or have they spent the majority of their savings since they haven’t been at work for so long?  These questions will be answered soon enough, but as for us in the HVAC industry, installers and technicians across the US are ready for a few weeks of downtime to recuperate from all the hard work they’ve put in.

Not one contractor I’ve talked to recently failed to see record sales over the last few months.  We’re all grateful to be in that position, too.  A lot of us wait all year for the summer months.  Thankfully, we didn’t see a lack of customers calling on us, as other industries have.  HVAC business owners never take for granted that they’ll stay busy enough to keep the doors open year after year.  It may come easier for some than for others, but early 2020 worried a lot of contractors.

Thanks so much for watching and we’ll see you on the next blog post.

Don’t miss our video on this topic:

COVID-19 Brings Changes to the Way Building Permits are Carried Out

COVID-19 building permits

The COVID-19 situation we've been dealt in 2020 has altered the way life is carried out. One impact is on the way the building permits are handled here in the Sacramento region.

The Process

When you go about changing out your home HVAC system, you have to get a building permit.  This is done in order to get a second set of eyes on the finished project. It serves to verify it was installed according to the California building code.  An inspector typically comes out to your house and walks through the job. He or she checks out the outdoor air conditioner, the electrical panel, the indoor furnace or air handler, and the ductwork in the attic.  I can’t say every inspector does this every time, but it is their prerogative to inspect the job the way they see fit.

But recently, with the onset of COVID-19, the building department shut down entirely during the first few months of the pandemic. They wouldn’t issue our building permits or come out to inspect them.  I can understand the change during the first few months of it all.  But now that society approaches this whole thing in a more informed way, you would think that wearing a mask, gloves, and any other form of personal protective equipment would suffice in making one feel safe in people’s homes so the inspectors can do their job.

We’re Essential Workers

I get it though. Some people aren’t the cleanest, and maintaining a safe environment for other people to come into isn’t a priority.  But, we as essential workers are coming out to homes across the Sacramento area to repair or replace heating and cooling systems.  Doesn’t it seem necessary and almost mandatory that the building inspectors come out to complete their simple 15-minute inspection, as part of completing the building permit process?

In most jurisdictions in our area, the answer is apparently, no.  Now when jobs are done, the inspector won’t come out to verify the safety of the installation for the homeowner.  The company that does the installation must send the installer back out to the house. They must carry around their cell phone to the points of inspection so the inspector can virtually carry out the inspection.  The installer puts the inspector on video phone and points the camera at the areas the inspector tells them to.

The Building Code

California Building Code addresses this in Section 110.5. It is the responsibility of the homeowner or their duly authorized agent to provide the “means and access for the inspection of the work required in the building code.” Previously, that meant as much as providing the ladder to access the attic. Some inspectors don’t even carry ladders with them these days.  So we have to provide them with one.  But that’s a whole other conversation.  This now translates to the contractor being required to return to the house to walk around the home at the direction of the inspector via video “means and access.”

Responsibility for Building Permits

Well, you gotta love it!  Being a contractor and running a business is one of the hardest things I’ve done.  Don’t get me wrong, Melissa, and I love doing it because it’s challenging and rewarding.  This is just another way we have had to adapt to the ever-changing environment that surrounds us.  Some building jurisdictions have completely shut down the permitting and inspections process altogether.  Some have rearranged the way they carry out the process.

Thanks for letting me share another aspect of what we do here at Fox Family Heating and Air.  It is a pleasure to serve you and carry out the process of improving your home comfort.  We’ll see you on the next blog

building codes

 

Don’t miss our video related to this topic:

Protecting Fox Family Customers and Employees During the Covid-19 Season

protecting customers during covid-19

The steps we take to prevent the spread of the virus in the Sacramento Valley are essential to us and you

I’m sure tired of talking about it.  It looks like there could even be another wave of it reemerging.  COVID-19 has turned out to be the most diabolical event to happen in my lifetime.  Restaurants and small businesses were the hardest hit.  The heating and air conditioning industry also saw it’s share of technician layoffs and even closing shop until things get back to some sense of normalcy.

The spring season is when we typically spend a lot of our days running preventive maintenance calls.  Pretty much all of our customers were telling us to stay home during the lockdown.  It was a stressful time for everyone.

Fox Family had one technician on call every day during this time.  That tech knew he could be called at any time to go on a service call.  Everyone else stayed home to protect themselves.  During that time, Melissa and I made sure our techs were still paid, and medical benefits were still intact.  We were able to take advantage of the federal PPP fund.  The Fund allowed us to take care of our techs, which, I’m sure, gave some relief to them during a solid two months off of work.

When May hit, the coronavirus started settling down across California.  People started letting us into their homes.  Our focus was not only to provide the same level of service to our loyal customers but to do so with extreme care.  It became mandatory during this pandemic that we show up to the door of people’s homes with our facemask and our gloves on as well as the usual shoe covers we wear to protect their floors.

We’ve never before faced having to wear face masks and rubber gloves in people’s homes to make people feel safe.  Wearing these PPE’s not only protected the customers but protected our tech’s loved ones when they got back home!  But we immediately noticed customers appreciated this step taken by Fox Family Heating and Air.  We always get great online customer reviews, but our latest reviews also mention the extra measures we’re taking to prevent the spread of the virus in our customer’s homes.  It’s a great feeling to contribute to our community.

Fox Family will continue looking out for our customers during and after the COVID crisis rears its ugly head.  The steps we take to prevent the spread of the virus are essential to us and to you.  Our techs are looking forward to serving you in your home.  You can feel safe knowing we are concerned for your safety as well.