IF THERE IS GOING TO BE A breakthrough year for digital home technology in the production home building industry, 2006 looks not to be it. The combination of cost and a relative lack of demand on the part of most new home buyers will conspire to position the “smart house” much as it was in 2005—an expensive curiosity confined mostly to custom and high-end production home building.

That's not to say that the emergence of digital technology in production homes will not grow next year. “It will be a measured increase,” says Russ Wyatt, vice president of homeowner services at Pulte Homes. “People will continue more and more to ask for it, and that is going to drive builders to offer it. But it's not going to jump by thirty or forty percent.”

FUNCTION DRIVES FORM The most recent research on the subject from the NAHB bolsters Wyatt's view, with both surveys of both consumers and architects indicating that while there is interest in some aspects of digital home technology, the tipping point has not yet arrived, at least not for full-featured digital homes. In a survey of 50 architects conducted over the summer, NAHB found that “consumers are interested mostly in structured wiring, wireless and automated lighting controls,” says Rose Quint, director of survey analysis for NAHB.

CONNECTING COMMUNITY: At Lennar's Villages of Columbus community in Orange County, Calif., all homes with be wired with CAT-5—and common areas will be wired for Wi-Fi hotspots.

What is more interesting about the NAHB architect survey, however, is that it turned up this information almost by default. “We really didn't focus on technology,” says Quint. “It was more about the physical aspects of the house.” One key finding on that subject was that the architects reported increasing interest among their customers in multi-function rooms that can be used as home theaters or media rooms as well as for fitness centers and even offices. Another was that consumers are ever more interested in outdoor living spaces, which would mean wiring out into the garden for entertainment and information options.

The most recent consumer research that directly addressed home technology was done by NAHB in 2004 through a mail survey early in the year and with focus groups later. That it has not been updated since can been seen as an indicator of incremental growth. “The items we heard about the most are structured wiring, monitored security systems, distributed audio, home theater, automated lighting control, energy management, home automation, central vacuum systems, multiple phone lines and multi-zone HVAC systems,” says Quint. But, she adds, “They didn't seem too interested in the chip in the refrigerator that tells you when the milk is out.”

MORE TIERS Anecdotal evidence, however, does support the notion that interest in and demand for digital technology increases with the price of the home. Conversely, it will be some time before even the most rudimentary technology makes it into affordable housing. As one home building executive, who asked to remain anonymous, put it, “You're always going to have a piece of the market that is not even going to get a structured wiring package. It adds to the cost, and we're loathe to do that.”

At KB Home, which altered its product line and moved more into the luxury segment, digital technology is very much a part of the pitch. KB Home technology product sales have increased more than 40 percent year-to-date when compared to sales from the same period in 2004, according to the company.

“We've spent time over the last couple of years with our integrators and the manufacturers to find how to package our digital options,” says Lisa Kalmbach, senior vice president at the KB Home Studio. “We're all about making it simple for the consumer.”

That simplicity of approach is evident in the way KB markets its technology packages. Five levels can be interconnected, but each deals with a particular system. The first, most basic (and essential) package is called KB Connect, which is the backbone for all other digital systems. It is comprised of structured wiring, including CAT 5 cable, throughout the home. The next package is called KB Entertain, which is a range of home theater options. Then there is KB music, which deals with distributed audio systems. KB Secure, the alarm system component, is next. Finally, there is KB Communicate, which is the intercom/communications system.

There are options within those system packages, but the array of choice—and thus the confusion that can result from too many choices—is kept to a minimum. But the systems are growing more sophisticated. “We just moved from where we would put our home theater in the living room to building a real home theater,” explains Kalmbach.

Learn more about markets featured in this article: Los Angeles, CA.