Active Opportunities in Construction and Housing Market

2. Active Opportunities in Construction and Housing Market • The Q3 2019 Commercial Construction Index (from USG Corporation and the US Chamber of Commerce) increased 3 points to 77, the highest score ever. The 2-point increase in contractor optimism, to 76, was a major factor in the positive report. • An excellent sign for HVAC and all other mechanical contractors was the 12.3% increase in housing starts during August 2019, which was the most since 2007. Lower interest rates and a slight increase in builders’ confidence were some of the factors. • According to a report from the Urban Land Institute (ULI) and PwC, the overall analysis of the commercial real estate market is very positive. Investors are bullish on the industrial sector and multifamily housing, but less so for office, hotel and retail.

3. Fewer Homeowner Remodeling Projects Will Make Intensive Competition • Although Metrostudy’s Q2 2019 Residential Remodeling Index (RRI) of 118.3 (a new record) is good news for remodelers, HVAC contractors and other professionals, its forecast is more moderate, with growth of 2.0% for 2020 and 2.4% for 2021. • The Joint Center for Housing Studies of Harvard University’s latest Leading Indicator of Remodeling Activity (LIRA) mirrors the Metrostudy forecast, as the LIRA will significantly decrease from +6.3% for Q2 2019 to +0.4% for Q2 2020. • The general economic conditions are a factor in homeowners’ remodeling decisions. Although retail sales, the job market and other indicators remain positive, many economists and consumers are still concerned about a possible recession.

4. Being Responsive to Homeowners’ Concerns • According to Modernize’s Q2 2019 survey of more than 25,000 homeowners, the majority, or 54%, of them said they spent 0 hours researching before searching for a professional, with 32% spending 1 to 5 hours. • An HVAC project contributes to homeowner stress for 38% of those surveyed, tied with roofing projects. The largest share of homeowners, or 65%, compare 2 to 3 quotes for HVAC and other professionals. • As with many consumer/homeowner buying decisions, most of them, or 42%, ask family and friends for a contractor referral, with many fewer, 17%, using search engines (Google), and 12% searching home improvement Websites.

5. A Cold Winter Is Good News • The Farmers Almanac (first published during 1818, and not to be confused with the Old Farmers Almanac, first published during 1792) predicts a diverse 2019-2020 winter, with “freezing, frigid and frosty” conditions from the Rockies east to the Appalachians. • Typical of most winters, the coldest period is forecast to be during the last week of January and into the first part of February, with an area from northeast Texas to the western Great Lakes experiencing extensive snow and cold temperatures. • Spring 2020 is likely to be later, as winter will keep its grip on the Midwest, Great Lakes, Northeast and New England.

6. A Bright Future • The concept of a zero-net-energy (ZNE) home is becoming more popular with homeowners, according to a 2019 study from the Propane Education & Research Council (PERC), which reported a 95% favorability rating among homebuyers. • Heat pumps have traditionally been a home-energy choice for homeowners and commercial property owners in the southern tier of the US; however, as heat-pump technology has advanced, its popularity is increasing in the Northeast and Northwest. • With more states legalizing medicinal or recreational cannabis use, or both, there are new opportunities for HVAC contractors to specialize in the highly sophisticated systems required for indoor-growing facilities.

7. Advertising Strategies • Since price influences homeowners’ selection of an HVAC contractor, his or her marketing messages should focus on distinguishing the company’s pricing from the competition, and especially how well the final price matches the quoted price. • Any advanced winter weather reports during your station’s local news is a very affordable, highly focused opportunity for a larger, local HVAC contractor to boost awareness of its brand. The spot should include an offer for a free pre-winter inspection. • HVAC contractors must have a very proactive referral program (see page 2 of the Profiler), as referrals are the basis for most homeowners’ selection of a contractor. Incentivize current customers with discounts or gifts, or even cash, for referrals that become jobs.

8. New Media Strategies • Social media is an excellent channel and videos excellent content for HVAC contractors to emphasize their pricing integrity, especially for remodeling projects, as this sub-sector is forecast to shrink during 2020. systems. • According to the Modernize survey, homeowners consider an HVAC contractor’s online ratings/reviews an important attribute, so contractors must proactivey ask customers for reviews as well as respond to them regularly, especially negative reviews. • HVAC contractors who focus on the commercial sector can also use social media to upload video “success stories,” information and insights about new energy-saving technologies and cost-effective alternative energy sources to replace existing systems.