Energy efficiency, regulations to drive HVAC demand
Demand in the U.S. for heating, ventilation and air conditioning (HVAC) equipment is projected to increase 5.1 percent annually to $16.8 billion in 2015, according to a study just released by The Freedonia Group, a Cleveland-based market research firm.
Rising interest in more energy-efficient HVAC systems, in part spurred by regulatory changes, will also support increased demand. Systems using less environmentally harmful refrigerants will be popular, despite their premium price. Public and private incentives will encourage owners to upgrade to models with efficiency ratings that are at or above Energy Star levels.
Environmental concerns will provide a special boost to cooling equipment, especially central and room air conditioners. Demand for these will increase at an above-average pace, benefiting from the continuing development of higher-efficiency models and from gains in the share of homes with central air conditioning. The cooling equipment industry is affected by a variety of regulations, including those involving ozone-depleting hydrochlorofluorocarbon refrigerants. For example, in 2010 the production and import of HCFC-142b and R-22 were banned, although the government permitted a declining allocation of R-22 to service existing equipment until production is completely banned in 2020.
Heat pumps accounted for the largest share of heating equipment value demand in 2010 and have been gaining share at the expense of less efficient equipment and those that provide heating only. Through 2015, demand for heat pumps is expected to post the strongest gains of any heating equipment, supported by their ability to provide efficient heating and cooling in moderate climates, and by rising interest in geothermal versions. Demand for boilers will also post above-average gains benefiting from the rebound in nonresidential and residential multiunit construction, and interest in radiant heating systems.
Detroit shines in otherwise downbeat housing report
The S&P/Case-Shiller Index, a leading indicator of U.S. housing prices, showed declines in both of its MSA indices for September 2011. The 10-city index dropped 0.4%, and the 20-city index slid 0.6% compared to the previous month.
On a yearly basis, the 10- and 20-city indices were down 3.3% and 3.6%, respectively.
The National Index showed an annual decline of 3.9% for the third quarter of 2011, although an improvement was shown over the 5.8% annual decline posted in the second quarter. Nationally, home prices are back to their first quarter 2003 levels.
Only two cities, Detroit and Washington, D.C., posted positive annual rates of 3.7% and 1.0%, respectively. Detroit has now recorded three consecutive months of positive annual rate.
Atlanta, Las Vegas, Los Angeles, San Francisco, Seattle and Tampa recorded lower annual declines in September compared with August.
“While we have now seen four consecutive months of generally increasing prices, we do know that we are still far from a sustained recovery,” said David Blitzer, chairman of the Index Committee at S&P Indices. “Eighteen of the 20 cities and both composites are showing that home prices are still below where they were a year ago. The 10-city composite is down 3.7%, and the 20-city is down 4.1% compared with July 2010. Continued increases in home prices through the end of the year and better annual results must materialize before we can confirm a housing market recovery.”
Outlook still bleak for underwater borrowers
CoreLogic, a provider of information, analytics and business services, has released data showing that 10.7 million, or 22.1%, of all residential properties with a mortgage were in negative equity at the end of the third quarter of 2011. This is down slightly from 10.9 million properties, or 22.5%, in the second quarter.
An additional 2.4 million borrowers had less than 5% equity, referred to as near-negative equity, in the third quarter. Together, negative equity and near-negative equity mortgages accounted for 27.1% of all residential properties with a mortgage nationwide in the third quarter, down from 27.5% in the previous quarter.
Nevada has the highest negative equity percentage with 58% of all of its mortgaged properties underwater, followed by Arizona (47%), Florida (44%), Michigan (35%) and Georgia (30%). This is the first quarter that Georgia entered the top five, surpassing California, which had been in the top five since tracking began in 2009.
Some other highlights from the study:
• There are nearly 22 million borrowers, or 45% of all borrowers, who have mortgages with an 80% or more loan-to-value (LTV) ratio, and 69% of those mortgages have above-market interest rates of 5% or more. Borrowers with above-average LTV ratios often find it hard to qualify for today’s historically low interest rates, CoreLogic noted.
• Of the 10.7 million borrowers in negative equity, there are 6.3 million first liens without home equity loans that have an average mortgage balance of $222,000. They are underwater by an average of $52,000. The remaining 4.4 million negative equity borrowers hold first liens and home equity loans with an average mortgage balance of $309,000. These borrowers are underwater by an average of $84,000.
There are 8.6 million conventional loans in a negative equity position that have an average mortgage balance of $272,000 and are underwater by an average of $70,000.
There are 1.5 million FHA loans in a negative equity position that have an average mortgage balance of $170,000 and are underwater by an average of $26,000.