Nobody said 2026 would be easy. The refrigerant transition that reshaped purchasing patterns last year did not simply resolve itself when the calendar turned. In late May 2026, the EPA removed the January 1, 2026 installation deadline for residential and light-commercial R-410A systems, giving distributors added flexibility to work through existing inventory even as production shifts to R-454B and R-32.
Meanwhile, tariffs layered more cost onto equipment that already carried a higher price tag, and housing starts remained soft in many regions.
It’s hardly an ideal scenario, but that’s where we find ourselves as an HVAC industry moving into the back half of the year. However, we know from experience that the heating season does not wait for the industry to sort itself out, and neither can distributors.
The question now is not whether conditions are difficult (they are), but how to read the trends and get ahead of them.
Heating trends looking ahead
The most significant structural shift driving the heating market right now is hybridization.
Air-to-water heat pumps paired with condensing gas boilers are no longer a niche product category for commercial projects or high-end residential work. They have entered the mainstream conversation, and that has meaningful implications for the ways distributors stock.
Traditional hydronic systems have always delivered comfort through a reliable formula: heat the water, move it through the building and let emitters do the rest. What changes in a hybrid configuration is the energy source behind that formula.
During most of the heating season, when outdoor temperatures stay above roughly 25 to 30 F, a heat pump can handle the load efficiently. The boiler steps in for peak demand and the coldest nights. The result is a system that reduces fuel consumption and operating cost without asking the homeowner to give up the comfort or the control they expect.
So it should come as no surprise that demand for these systems is real and growing. Some of that is driven by incentive programs and state-level electrification policy. Some of it is driven by homeowners and building owners doing the math on operating costs and making a rational economic decision.
Either way, the product mix arriving at distributor counters looks different than it did three years ago. Accessory requirements such as buffer tanks, low-loss headers, intelligent controls and expanded hydronic piping are following close behind.
The boiler market itself remains healthy. Condensing boilers continue to gain share from older atmospheric units, not because of mandates, but because contractors and their customers have gotten comfortable with the efficiency gains and the payback calculations that support them.
High-efficiency water heaters are also moving at a faster pace, partly as a natural complement to hydronic systems and partly in response to state and utility rebate programs that make the purchase decision easier.
As for the broader residential market, the picture is more cautious. Entering 2026, major manufacturers suggested that residential unit volume would come in flat to down, with Q1 bearing the sharpest year-over-year decline. Some of that weakness reflects a nationwide housing affordability problem: fewer new homes means fewer new systems.
However, the replacement market remains active. Systems that were installed during the construction boom years are now old enough to need replacement, and that cycle does not stop regardless of interest rates. Expect Q3 and Q4 to benefit from that replacement activity as temperatures drop and homeowners discover problems they can no longer defer.
The current distribution approach
The single most important thing distributors can do before the heating season is become precise with their inventory.
Tariff costs have reset the price floor on equipment, and pre-tariff stock has been exhausted at most locations. Every unit purchased today carries the full tariff-adjusted cost. That changes the math on stocking decisions, lead times and pricing.
Strategic procurement planning is not a back-office exercise anymore. Distributors that have built strong forecasting disciplines — such as tracking sell-through data, working closely with contractor accounts to understand their backlog and maintaining transparent communication with manufacturing partners about production and lead time — are the ones who can make smarter buying decisions.
Sitting on too much inventory ties up capital and creates risk if pricing moves. But running short in October or November is worse. Getting that balance right requires the kind of demand visibility that only comes from treating forecasting as a core competency.
For distributors, branches that have invested in counter training, technical resources and proactive outreach are better positioned to earn and keep new business. When a contractor trusts their distributor to give them straight information about equipment compatibility, accessory requirements and code changes, they come back. When they feel like they are getting oversold or under-supported, they look elsewhere.
One area where both groups need to pay close attention is pricing communication. Depending on the product category and manufacturer, equipment prices can be up 15% to 30% compared to this time last year, converting to 6% to 10% additional out-of-pocket cost to the homeowner. Contractors who have not updated their customer pricing will find themselves absorbing cost they cannot recover.
And distributors who have not had direct conversations with their contractor accounts about what is driving those increases risk having their customers draw the wrong conclusions and shopping elsewhere. Transparency is more than good practice right now. It’s a competitive tool.
Technology, regulation and the long game
The technology story in HVAC and hydronics has two tracks right now, and it is worth keeping both in view.
The first track is field-level. Smart controls, connected thermostats and cloud-based diagnostics are moving from premium add-ons to standard expectations, particularly in commercial applications and in high-end residential work.
Contractors who can commission and troubleshoot these systems have a service capability that justifies higher labor rates and drives repeat business through service agreements. Distributors who stock the controls and accessories to make those systems work — and bring deep knowledge about their inner workings — become a resource rather than just a supply source.
Hydronic systems in particular benefit from advances in controls technology. Outdoor reset, weather-compensating controls and variable-speed circulators have been available for years, but the integration of those features into systems that communicate with building management platforms and smart home ecosystems is accelerating.
With that, system designers who understand how to configure those integrations and distributors who understand enough about the technology to support the conversation will find themselves working at the higher end of the market where margins are more defensible.
The second track is operational. Within distribution, the case for technology investment has shifted from aspirational to straightforward. Real-time inventory management, AI-assisted demand forecasting and integrated pricing tools are giving distributors who adopt them a meaningful advantage in managing the current environment.
When equipment costs change frequently and lead times are variable, knowing what you have, where it is and what you should order next is worth real money. The distributors still running on spreadsheets and gut feel are operating with a structural disadvantage.
On the regulatory front, the Department of Energy’s (DOE) furnace efficiency rulemaking represents one of the most consequential near-term disruptions for the channel.
A finalized DOE rule requires all new residential gas furnaces to meet a 95% AFUE standard for units manufactured after December 18, 2028. This effectively mandates condensing technology across the board.
The U.S. Court of Appeals for the D.C. Circuit upheld the rule in late 2025, though the gas industry has since petitioned the Supreme Court for review. For now, the 2028 compliance deadline remains unchanged, with no extension granted as the petition moves through review. Either way, the venting implications for replacement work in older homes are real and significant now, and distributors should be well-versed on how the landscape is evolving as they support contractors navigating these decisions.
Manufacturers are navigating real physical constraints in designing systems that meet efficiency thresholds while still fitting current venting configurations, a tension that does not go away quietly.
And of course, tariff policy is the wildcard that no one can fully plan around.
What the industry can do is build procurement strategies that do not depend on any single sourcing path. Distributors who have worked to diversify their supplier relationships, even modestly, are better positioned to respond when trade policy shifts.
It’s crucial to understand that those conversations take time to develop. Starting them before a disruption is always better than starting them during one.
Finally, the skilled trades shortage cannot remain a background issue. It is showing up in real ways during peak season and that pressure will not ease in the coming months.
Distributors actively investing in workforce pipelines through trade school partnerships, apprenticeship programs and structured onboarding for new technicians are building a durable advantage. The ones who treat workforce development as someone else’s problem will feel the cost of that decision every heating season for the foreseeable future.
There’s no doubt: The HVAC market is more complex than it was a few years ago. The regulatory environment is more demanding, the product technology is more sophisticated and the cost structure has shifted in ways that require everyone in the channel to be more deliberate.
However, none of that changes a single, fundamental dynamic driving our industry. When it gets cold, people need heat. And the distributors who are ready to deliver it? That’s who will earn the business. l
Jason Scott is a regional vice president for mSupply, a North American distributor of parts and equipment serving the HVAC, plumbing and appliance repair industries. He oversees the Northeast HVAC Region and is based in the Greater Philadelphia area.
