Last fall, the Drees Co. announced that every new home it built in its Cincinnati market would have a state-of-the-art Evolution HVAC system manufactured by Bryant Heating and Cooling. By adopting higher-efficiency components, the company aims to show that it's the most energy-savvy production builder around.

Cost-cutting is an important profit strategy for many builders. But heating and cooling is one area where production builder Drees Co. of Fort Mitchell, Ky., says it pays to invest in a better product—in this case, up to 10 percent more.

This past year's HVAC switch came after extensive research into fuel savings for customers. “After seeing what the Evolution can do with the variable speed and the 96-percent-efficient furnace versus the 92-percent-efficient furnace we were using, our customers are looking at a five-year payback or less,” says Joe Halpin, corporate purchasing manager, adding that Drees homes cost about $10,000 more than others in the area.

That strategy may not work as well in lower-priced markets. David Price is operations manager for St. Peters, Mo.-based Whittaker Homes, whose prices average $185,000. He says home technology such as high-speed Internet access trumps incremental heating and cooling upgrades unless the improvement is palpable. For example, buyers are passing on more efficient air conditioners at $500 a pop.

Sales of higher-efficiency air conditioners will pick up the pace as Jan. 23, 2006, approaches: That's the date by which the Department of Energy has decreed that all units must be 13-SEER or better. However, builders and buyers alike have been slower to spring for chlorine-free coolants like R-410A, the ozone-safe alternative to R-22, commonly known as Freon.

“People are more concerned about a higher SEER than about having 410A,” says Dick Rydzeski, director of national builder sales at Goodman Mfg., an HVAC producer. “Everyone has the better coolant available, but it represents less than 5 percent of total air conditioning market share.”

Still, it's a feature that many upper-end buyers simply expect. Arthur Rutenberg Homes, a franchise of builders based in Clearwater, Fla., is paying a little more to install R-410A products as standard in its homes, which average $500,000 plus the lot cost.

“We're in a luxury market where a lot of customers recognize the value in that,” says Ed Brown, vice president of purchasing. However, his buyers struggle with the cost/benefit ratio of upgrading to 14- and 16-SEER air conditioners, paying more attention to gadgets such as variable-speed air handlers, air cleaners, and programmable thermostats.

The builder incentive for specing R-410A-based systems will increase closer to 2010, the EPA-mandated deadline by which all new cooling equipment must be Freon-free. “If someone is buying a house with a 30-year mortgage, they should be moving toward the new refrigerant,” says David Meyers, vice president of strategic accounts for Carrier and Bryant. “An air conditioner lasts 15 years, so from a homeowner's perspective, we think they'd chose the more efficient Puron-based products.” (Puron is Carrier's trademark name for R-410A.)

But will the R-22 phase-out affect its supply for servicing the old systems? Probably not, says Ed Dooley, vice president of communications for the Air-Conditioning and Refrigeration Institute in Arlington, Va. “R-22 as a service refrigerant will be manufactured until 2020,” he says. “And under EPA regulations, the refrigerant must be recovered, not emitted. Reclaimers will take the coolant and reconstitute it to meet the standard of purity for reuse.”