By Cheryl Weber. As little as five years ago, items such as a central vacuum system, a home security system, and surround-sound in the family room represented the lap of luxury to the average new home buyer. But that was the 1990s. Modern-day consumers have rapidly come to expect much more from their house electronically. They may want music on the front porch, plasma TV with cable connections in multiple rooms, rear-projection video with a pull-down screen, and a control panel that does the job of six remotes.
Anecdotal evidence of Americans' red-hot love affair with tech gadgets abounds, but the numbers are proof. According to the Consumer Electronics Association, sales of home electronics increased $3 billion between 2001 and 2002, to a total of nearly $96 billion. And with the advance of technology, conventional phone and cable lines have become woefully inadequate.
Most builders now offer new home buyers some type of structured wiring -- a bundle of high-speed wires that conduct Internet connections and home networking systems. Usually the package is a combination of Category 5 wiring for telephone and data, which provides about 10 times the capacity of standard copper wire, and RG6 coaxial cables for video cameras and television. Last year, 42 percent of new homes included structured wiring, according to an NAHB Research Center study of builders of single-family detached and single-family attached units. The results represent each of the nine U.S. Census divisions.
Wiring for the future is a relatively new profit center for builders, and in many markets, a way to maintain a competitive edge. Before William Ryan Homes' Chicago North division began including a cyber package of CAT 5 phone wiring and RG6 cable as standard three years ago, 75 percent of its buyers were requesting it.
"We passed up a profit margin opportunity by putting the cost in our base price," says division president Mike Hardin, whose homes range from $230,000 to $600,000. "We found it made our buyers a lot more comfortable at the time of purchase. It gave them one more reason to buy a William Ryan home."
William Ryan's most popular upgrades include rough-in conduits for home entertainment systems, and "tech ports," which are combination phone, cable, and data jacks that run back to a central control panel to allow for networked systems. "Less than 10 percent of our buyers opt for tech port upgrades, but it's growing," Hardin says. The builder's profit margins on electronic options vary from 35 percent to 50 percent.
Home Technologies Offered by Home Builders
|Automated lighting control||0%||28%||3%||31%|
Source: NAHB Research Center State of the Builder Technology Market Survey, 2003
Building in the Washington, D.C., metro area, which is dominated by high-tech industries, Centex Homes has been installing structured wiring in every home in the area since 1998. The builder's standard package includes bundled wiring for three telephone and three cable outlets. That structure gives buyers the capacity to expand to eight TV locations and four phone lines coming into a single telephone port. "People see the immediacy for having extra prewires for phone and cable so they don't have to punch holes in their walls later," says Barbara Hoskins, manager of Centex's home selection center. She says roughly 40 percent of Centex's buyers opt for upgrades, and that offering them hasn't hindered the construction process. "Five years ago it was a new process, but now it's just like any other component going into the home. It's just one extra subcontractor to schedule." Cyber Chase
Not long ago, the home-communications industry was fraught with miscues. Consumers wanted their homes to be compatible with emerging technology, but they didn't know exactly what to ask for, and builders didn't know what to give them. "In the past, the low-voltage and high-tech stuff was done by regular electricians, not networking specialists," Hardin says. "It was difficult communicating what needed to be done." By contrast, William Ryan Homes now uses vendors that specialize in networked systems. Not only can they provide and install the products, they also help the builder present them in plain language. "Now that we have these specialists, I'm more confident that we're meeting the needs of the consumers," Hardin says.
Although only 35 percent of the home builders surveyed in the NAHB study use networking specialists to install the technologies, no doubt that figure will rise as vendors become more market savvy. American Home Systems, based in Alexandria, Va., offers a variety of services to builders such as Toll Brothers and Richmond American Homes. Until three years ago, the 31-year-old technology company primarily sold home security, central vacuum, and intercom systems. Then it began installing structured wiring and add-ons in 10 to 15 custom homes a year. Last year, though, American Home Systems wired about 1,000 homes, and managing director Paul Jablonski says the company is on track to double that amount in 2003.
"Wiring packages can become quite populated with additional features," Jablonski says. "In some cases, builders are offering 50-some options. We typically custom design a system for the home buyer and provide the order to the builder, who incorporates it into the mortgage."
The technology, too, is becoming less costly for builders for install. In the past two years, for example, some companies have devised more powerful one-box solutions. Niles Audio, in Miami, Fla., sells a product called ZR8630, in which one box distributes audio and video connections to six zones throughout a house. "The box retails for $3,000; adding keypads and speakers might bring the total cost to $700 to $1,000 a room, minus installation," says marketing manager Rick Richardson.
While builders need to offer home technologies to stay competitive and satisfy consumer demands, they're also poised to benefit financially. "We're able to make more money in this area than we were in the past," Hardin says. "It gives us a return on our investment."