By Steve Zurier. There's at least three ways builders can deal with the rise of home technology. First, builders can do nothing and wait until more customers demand home networks, distributed audio, integrated security, or lighting and HVAC systems. Second, builders can place their toes in the water, prewire their new homes for home networking and cable TV with Category-5 wiring and RG6 cable and refer upgrades to local installers. And finally, builders can embrace home technology, start a new division dedicated to marketing and testing the new products, and look for ways to make home technology a new profit center.
Much of the research and reporting suggests that most builders prefer option two. In telephone interviews conducted in April by Builder of nearly 20 mid-sized builders with sales in excess of $5 million each, almost all pre-wired their new communities with Cat-5 wiring and RG6 cable. And most offered home technology through installers.
The recent research report, "State of the Builder Technology Market," by the NAHB Research Center and the Consumer Electronics Association (CEA), backs this up. A full 37 percent of the 8,830 homes built in 2002 by the 552 builders the NAHB and CEA surveyed had structured wiring as standard, but only 7 percent of the homes came with monitored security as standard and just 2 percent had home theater and distributed audio as standard.
More telling: The builders installed home technology themselves in only 2 percent of the homes built by the group. The vast majority of the group uses either an electrical contractor or a security installer.
"I'd much rather put my customers with an expert who can give them what they need," says Pat Kurek, building manager at Hedgewood Homes in Atlanta. "I just partner with an installer, and we let him quote our prices to the customer. The home technology is included in the mortgage, and it's a profit center for me."
Builder Thomas Doucette, president of Frontiers-Community Builders in Stockton, Calif., says it's a constant battle for builders to analyze what home buyers want.
"I feel, in time, we'll see more of the home technology options become standard," says Doucette, whose company offers Cat-5 and RG6 as standard. "But by the time you add all the technologies together and build an integrated system it's an expensive item. It's a high-tech option, and many people would still go for a low-tech option with a swimming pool."
It takes a village
Village Homes in Littleton, Colo., is one of the real home technology leaders, having launched its TechTouch division six years ago, which markets, installs, and tests home technology products. Bob Micho, who heads up the home technology group, says the average TechTouch sale is about $3,000, with about $18,000 being the company's highest one-time sale. Salespeople meet with home buyers at least two times during the options selection process.
"We recognize that there are certain price points our buyers will be sensitive to," notes Micho, whose company builds roughly 500 to 800 homes a year in the $300,000 to $500,000 price range.
"But TechTouch is a very profitable division for us," Micho says. "We see a cocooning effect after Sept. 11. We're seeing our sales increase. The buyers will put the home theater or security system in. They want the home to be king and don't want to go out."
Micho notes that most buyers are focused on the colors of their walls or the type of appliances and cabinets going into the kitchen. "When we get them into TechTouch," he continues, "we say, 'Now it's time to focus on the features that enhance your life in the home.'" Each home is pre-wired with Cat-5e wire and RG6 cable, as well as a tech panel that includes a 12-port telephone hub and an eight-port coaxial video distribution hub. There's a tech port in every room. Each can handle two Cat-5e connections, typically one for a PC and the other can be split into up to four voice lines; and two RG6 connections that can handle cable connections and HDTV. Every home is also pre-wired for an alarm system.
Popular upgrades offered by TechTouch are hubs for home networking, controllers for home theaters and distributed audio, security systems, office phone systems, central vacuums, and climate control systems. Micho says the one item TechTouch refers to an installer is the more advanced lighting systems. He explains that custom lighting systems can be very expensive -- between $25,000 and $40,000 -- so he doesn't want to run up the costs.
|Structured Wiring Matures: Some 42 percent of homes built by builders surveyed included installed structured wiring as standard or as an upgrade.|
Base: 552 home builders, 8,830 homes
Source: "State of the Builder Technology Market,"; 2003 IBS Show by NAHB Research Center and Consumer Electronics Association
Village Homes tends to customize components based on each specific job, but it does have standard controllers it uses for home theaters and security systems. Village uses the Marantz RC 1200 controller and various SpeakerCraft speakers for home theater and the PC5010 from Digital Security Control for security. Custom security
One place security is popping up as a standard home automation feature is in the custom-home business. Desert Trails Development, which is building Stonebrook Estates, a 150-unit development in Apple Valley, Calif., offers security as part of its basic home technology package.
Carl Jones, the company's general manager and vice president, says his basic home technology package runs around $6,200. That price includes Cat-5 wiring and RG6 cable for home networking, high-speed Internet access, phones, and cable and satellite TV; and an On Q 1100 controller, primarily for security and standard surveillance cameras that link the in-house television to the entrance gates and the pool. All the equipment is installed by Lomac Information Systems in Victorville, Calif.
Jones says his most popular upgrade is climate control, which, for an additional $168, is a no-brainer for people living in the desert heat. Another upgrade is lighting, which costs $300 for the board and $150 per switch. And since the On Q 1100 controller is standard, people are also adding on home theaters and distributed audio.
"If people want to fully automate the house they can spend another $10,000 to $20,000," Jones says, adding that his company couldn't afford to run up the price tag another $20,000. "For now, our company is putting in the security system and pre-wiring for Internet access, home networking, and home automation.''
The future is now
One of the more promising home technology projects is the Village at Tinker Creek, a 170-unit project in Roanoke, Va., that Commonwealth Builders is doing in tandem with IBM's Pervasive Computing division.
Jerry Godsey, president of Commonwealth Builders, says the project kicked off this spring with about 20 homes using the home technology products via the Web. The idea is for homeowners to access a home page on a personal computer that would be a gateway into a full home automation system. People will be able to set smoke alarms, lights, thermostats, and security over the Web, as well as manage surveillance cameras and read gas and electric meters online. The home page also has a link to Lotus Notes, which manages e-mail and appointments for the homeowner.
The core computing platform was developed by IBM. Each house will have a residential service gateway from CP Technology, running IBM's WebSphere Everyplace Embedded Software. The gateway and WebSphere software deliver the basic platform for all the Web-based home automation applications. The residential gateway will also have home automation control software from Shanghai Video Audio (SVA) that manages in-home devices such as smoke detectors, security cameras, lighting, and thermostats. The SVA software is also accessible via a back-end WebSphere portal, which includes e-mail, a family calendar, address book, and instant messaging. The portal provides access to community news and information for the residents of the Village at Tinker Creek. Along with the residential gateway, homeowners can also opt for an 802.11b hub for wireless computing and communications.
Godsey says homeowners will pay about $3,500 for the full automation system. Users also will be charged $20 a month for security, which includes a 24/7 emergency service; $40 a month for high-speed Internet access; and $20 a month for the basic portal service. Godsey's goal is to convince homeowners that if they can save 20 percent a month -- or $40 monthly -- by managing their utilities more efficiently, then, minus the upfront fee which is factored into the mortgage, they are getting the full service for the $40 cost of high-speed access.
Commonwealth Builders had its grand opening and unveiling the home automation system on April 26. Godsey expects that of the 170 homes, the 40 percent to 50 percent of consumers who tend to pay for high-speed access will opt for the home automation system.
Village Homes, Desert Trails Development, and Commonwealth Builders are real pacesetters. But there are other success stories out there, which is why home technology advocates should be hopeful. As a group, builders may move glacially, but they do move. So it's only a matter of time before more builders launch operations like TechTouch or invest in high-tech communities such as the Village at Tinker Creek.
Some may fail, others may succeed, but builders will clearly continue to find creative ways to deliver home technology without driving their costs through the roof. Don't expect widespread adoption this year, or even next year. But it's bound to happen by 2005 or 2006 and beyond, when tech-savvy Gen-Xers and Generation Y become more mainstream customers.
|Installers Rule: Only 2 percent of the homes built by the group surveyed had home technology installed by builders.|
|Type of Installer||
Percent of Homes(Multiple responses accepted)
|Base: 552 builders, 8,830 homes|
|Source: "State of the Builder Technology Market," 2003 IBS Show by NAHB Research Center and Consumer Electronics Association excerpts of the report are available upon request from the NAHB Research Center, call 800-638-8556 for more information.|