Heat Pumps Outsell Gas Furnaces for the First Time in U.S. History

For the first time, U.S. manufacturers shipped more heat pumps than gas furnaces in a calendar year. The numbers from AHRI's 2025 year-end report: 3.6 million heat pump units versus 3.2 million gas furnaces. Heat pumps also outsold traditional one-way air conditioners in Q4 2025 — another first.

The U.S. heat pump market hit $14.81 billion in 2026 by market research estimates. That's 47% of all cooling equipment sales. Five years ago, heat pumps were a niche category outside the Southeast. Now they're the default recommendation in new construction across most climate zones.

What's Driving the Shift

Federal money. The IRA provides a 30% tax credit (up to $2,000) for air-source heat pumps and 30% with no cap for ground-source systems. For a $7,000 installed air-source system, that's $2,000 back — bringing the net cost to $5,000, which is competitive with a gas furnace plus central AC. The credits run through 2032.

State incentives stack on top. California's TECH Clean program offers $3,000-4,000 per unit for gas-to-heat-pump conversions in existing homes. Combined with the federal credit, a homeowner's out-of-pocket on a $7,000 system can drop to $1,000-2,000.

Efficiency improvements. Variable-speed compressor heat pumps now hit SEER2 20+ for cooling and HSPF2 10+ for heating. Cold-climate models maintain rated capacity down to -15°F. The "heat pumps don't work in winter" objection died somewhere around 2022, but a lot of contractors haven't updated their pitch.

New construction codes. California, Washington, New York, and Colorado all have building codes that either require or heavily incentivize all-electric HVAC in new residential construction. Builders are specifying heat pumps as standard equipment.

What HVAC Contractors Need to Do

Get trained. Heat pump installation is not the same as furnace installation. Refrigerant line sets, electrical requirements (most systems need a 30-40 amp dedicated circuit), condensate management, and defrost cycle commissioning all require specific knowledge. Manufacturers including Daikin, Mitsubishi, Carrier, and Trane offer free or low-cost installer certification programs.

Stock appropriately. Lead times on popular heat pump models (Mitsubishi Hyper-Heating, Daikin Fit, Carrier Infinity) are running 2-4 weeks. Contractors who keep one or two common sizes in local inventory can close faster than competitors quoting 3-week delivery.

Learn the incentive stack. Your customers don't know about the IRA credit, the state rebate, the utility rebate, and the potential local permit fee waiver. You do — or you should. Walking a customer through $4,000-6,000 in available incentives is the single most effective closing tool in HVAC sales right now.

Dual fuel is a bridge. For customers who aren't ready to go all-electric — or in areas where natural gas is very cheap — dual-fuel systems (heat pump plus gas furnace backup) offer a middle ground. The heat pump handles 80-90% of heating hours; the furnace kicks in only during extreme cold snaps. It's a higher-margin install than either system alone.

What This Doesn't Mean

Gas furnaces aren't disappearing. The 3.2 million units shipped in 2025 is still a massive market, and the installed base of roughly 60 million gas furnaces will need service for decades. Repair technicians who specialize in gas heating aren't obsolete — there's a 15-to-20-year service tail on every furnace installed today.

But the growth is in heat pumps. New installs, replacements, and the service revenue that follows all skew toward heat pump systems going forward. Contractors who build heat pump capability now will capture the growth. Those who wait will compete for a shrinking share of gas-only work.

For related coverage, see our analysis of the DOE 2027 efficiency standards and the EPA refrigerant transition update.