“I think the infrastructure to support them is the biggest challenge when you’re using this technology compared to a conventional tank,” says Aaron Siegel, vice president of sales and marketing for Eemax. “Everything else is a gigantic plus.”

Unlike 200-pound tank water heaters, tankless units can be installed virtually anywhere. Most tankless units weigh only 40 to 60 pounds, and some are so compact they can fit in a closet or in between wall studs.

Space savings and efficiency are the top reasons Mike Moon of Urban Renaissance Group is installing tankless units in the Walnut Hill Townhomes in Tennessee. “I find buyers understand that tankless water heaters are an upgrade and add value over conventional water heaters,” he says. “This helps differentiate our product from the competition.”

Tankless water heaters currently comprise about 4% of the total U.S. water heating market, but the demand is growing. Over the last eight years, the industry has increased 20% to 40% a year, according to Rinnai. In addition, the Department of Energy estimates that Americans can save 78% in utility costs, avoid 4.2 million tons of carbon dioxide emissions, and achieve energy savings of 3.9 billion kWh and 270 million therms of natural gas by using high-efficiency tankless water heaters in five years.

As more builders look for energy-efficient technology, tankless water heaters may one day be the norm, rather than the exception, in homes nationwide.

Amy Fischbach is a freelance writer based in Overland Park, Kan.