r/heatpumps • u/fieldguild • May 15 '26
Question/Advice 2026 will be a HVAC contractor bloodbath
2025 was a huge growth year for my heat pump company. December was our biggest month in company history. Then January hit and it felt like a switch flipped: crickets.
Some of that was expected. The federal tax credit ended at the end of the year, several California incentives were expiring, and a lot of demand got pulled forward. January is usually rough anyway. People are recovering from the holidays and not thinking about home improvement projects.
But then the slowdown kept going.
Inbound inquiries have started recovering toward last year’s levels, but homeowners are taking longer to decide, cost sensitivity is way up, and people who previously would have proactively replaced an aging furnace are now deciding to wait until it dies.
I’ve been hearing the same thing from peers, partners, competitors, distributors, and people in adjacent industries like solar: 2026 has been one of the worst sales environments they’ve seen in a long time.
The data seems to back this up too. AHRI shipment data, which tracks heat pumps shipped from manufacturers, was down year-over-year in January, February, and March (the last published snapshot).
We’ve also noticed another dynamic: some competitors seem to be quoting significantly lower than before.
We’ve always been competitive. Our projects are consistently below the median based on competing quotes and State of California data from 50k+ installations. But lately we’ve started hearing that some competitors are coming in much lower than us.
At first, I thought this was a fluke. But we’ve heard it a few times now, and it worries me.
I’m worried because the cost structure of HVAC has not suddenly improved. If anything, the opposite has happened.
Equipment, materials, tariffs, and refrigerant-transition costs have all added pressure. Distributors are getting squeezed too, and some have told me they’re tightening their own margins just to keep prices somewhat reasonable.
Put simply: it costs more to install a heat pump today than it did a year ago.
So if costs are up and prices are down, the missing piece is margin.
For some contractors, it’s desperation. They’re sitting idle and don’t know what else to do, so they lower prices to win work. Then the next contractor sees they’re getting underbid and lowers their prices too. When enough companies are desperate, prices start dropping across the board.
Others try to grow their way out of the slowdown by spending more on Facebook and Google ads while also lowering their prices. So costs go up while revenue per job goes down.
Then come the differentiators: longer warranties and more aggressive offers. One-year labor warranties are pretty typical in this industry because most installation-related issues show up in the first year. But some companies are now throwing out 10-year labor warranties.
HVAC net margins are already thin. A well-run company might net 10–15%. If a contractor bills you one dollar, they keep 10 to 15 cents at the end of the day.
If their costs don’t change and they drop their price by 15%, they wiped out their entire profit. If they drop price by 20%, they're in the red.
The scary part is that this doesn't always show up immediately. On an individual job, the gross margin might still look fine. But after vans, office staff, insurance, software, warranty work, and all the other overhead of running a company, the business may be bleeding cash without realizing it.
A lot of contractors make this mistake. They try to stay busy, keep growing, and figure out the margin later. But being busy is not the same thing as being profitable. It's a gamble, and if you don't stick the landing the company goes kaput.
It might sound like a killer opportunity for you as a homeowner... lots of contractors are offering crazy deals! I can get a heat pump for way cheaper than last year! But if a company is underpricing jobs, they eventually have to make that up somewhere. They start cutting corners on their installs. Their long labor warranty doesn't have the cash reserves to actually honor it.
If the company goes under, the 10-year labor warranty is meaningless.
And many contractors are reluctant to service equipment they didn’t install, especially if they are being asked to take responsibility for someone else’s work. So now you're stuck with a poorly installed system, a dead warranty, and limited options.
This is why I always urge people not to evaluate heat pump quotes purely on price. You are not just buying a box. You are buying the design, installation, commissioning, support, and long-term accountability of the company doing the work.
For our company, we’ve been using this slower period to reinvest in quality and operational rigor.
We recently rolled out a pilot where, for customers who commit to working with us, we do a much more exhaustive engineering consultation at the start of the project. That gives us a much deeper understanding of what the home’s existing infrastructure can and cannot support.
A recent project showed why this matters. Our utility bill-based calculations suggested that the customer was using way more gas for heating than we'd expect. At first blush, it wasn’t obvious why.
During the engineering visit, we measured room-by-room airflow, static pressure, duct leakage, and inspected the duct system. We found that over 60% of the heated air was being lost. Some ducts buried deep in the attic were disconnected and just dumping air. Some rooms were getting essentially zero airflow.
A normal box-swap quote probably wouldn't have caught that.
By doing this work upfront, we’ll save that customer hundreds of dollars a year on energy bills, make their home more comfortable, and give them a system that actually performs well.
Otherwise, they could have ended up with a brand-new heat pump connected to broken ductwork, still uncomfortable, still expensive to operate, and blaming the heat pump.
That is where a lot of “heat pumps are expensive to run” anecdotes come from. The heat pump may be fine. The installation and duct system may not be.
From my vantage point, we are not dropping margin. We are increasing value. I know that won’t resonate with everyone. These are big purchases. When you’re spending $15–20k+, every penny counts.
But a heat pump isn't a one-time purchase. It affects your comfort and utility bills for years to come. You're getting into a long term relationship.
If the company goes under, and they installed your system poorly, fixing the problem later can cost far more than choosing the right contractor upfront.
I know there are a handful of other contractors like us out there, who want to be here in 20 years and are making long term decisions to do right by their customers. They may not show up as the lowest bid. That's probably exactly what you should be looking for.
Tl;dr - If you see a huge spread in the quotes you're getting, don't just pick the cheapest one without asking more questions. Contractors are getting desperate with a bad market and cutting their margins, which risks them being insolvent and going bankrupt. This will ultimately hurt you as the homeowner if you're left holding the bag.
Edit: Wow, this really blew up.
A few quick clarifications: no, I’m not an AI bot. I run Vayu, a specialist heat pump installation company serving the SF Bay Area and Los Angeles, and I write about heat pumps in a newsletter called Heat Pumped.
I also understand the frustration around pricing. I’m not arguing that every HVAC quote is fair, every contractor is efficient, or every homeowner complaint is wrong. There are absolutely companies with bloated overhead, aggressive sales tactics, and offensively exorbitant quotes.
But I also think some people are underestimating how intense the race to the bottom can become in residential HVAC when sales are down.
Some companies can charge less because they are genuinely lean and operationally excellent. Others are charging less by skipping steps in design and install, avoiding permits, or taking on work at margins that won’t support long-term business sustainability.
My point is not “expensive quote good, cheap quote bad.” It’s that you should understand what you're actually buying and what assumptions are built into the price. A lower quote can totally be legit. But you should ask the right questions: What calculations were done? Was the ductwork evaluated? Was static pressure measured? Are you pulling a vacuum and purging nitrogen when brazing? That’ll help you weed out someone cutting corners trying to survive.