Seamless Integration

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HOME TECHNOLOGY ACCESSORIES such as giant-screen HDTV and surround-sound speakers not only add family entertainment value but also allow adults to escape the tensions of their stressful lives. But that other great modern plaything, home automation, is also gaining ground. The Consumer Electronics Association of Arlington, Va., reports a swelling consumer interest in well-designed technology products that integrate seamlessly into the home. It’s one of the trends driving up sales of consumer electronics products: Factory sales to U.S. dealers are projected to top $125 billion this year—an 11 percent gain over 2004’s volume of $113 billion.

Earlier this year, the CEA’s third annual State of the Builder Technology Market Survey showed that while structured wiring and security systems remain the two most common technologies included in new home starts, the number of builders offering whole-house technologies such as energy management systems is on the rise. More importantly, thanks to the decline in installation costs over the past year, builders report that their profit potential on tech products is creeping upward.

HIGH-TECH ESSENTIALS By now, about half of all builders install at least a standard structured wiring hub that gets buyers ready for add-ons, according to the survey. One such builder is Centerline Homes of Coral Springs, Fla., whose houses range in price from $270,000 to $700,000. Its buyers currently receive a generic structured wiring system, although starting with the next single-family home community, the builder plans to take its tech offerings a step further. “We’ve interviewed some subcontractors and are just about to offer some home automation options like security or lighting,” says Debi Brown-Whitcomb, design options department manager. She adds that although touch-screen controls and programmable lighting pathways don’t regularly appear on the wishlists of Centerline’s buyers, the builder wants to stay in step with other builders and with the high-tech customers who walk through the door.

TECH TRENDS: The Consumer Electronics Association reports a swelling consumer interest in technology products that integrate seamlessly into the home. In some markets, the attempt to simplify home automation choices by packaging them like cabinetry options only ends up adding more complexity to the process. Based in Northern Virginia, a mecca for the tech industry, McLean-based Craftmark Homes stopped offering sophisticated technology packages two years ago because they rarely met the requirements of individual customers. “People ask for wiring for home offices, computer systems, or home theater systems,” says Tom Moran, executive vice president at Craftmark, whose average home price is $800,000. “We sell a lot of everything. We’ve had one person spend over $100,000 on a home theater. Whatever we’d do wouldn’t satisfy everybody.” Buyers seeking customization work directly with Craftmark’s subcontractors to design their own systems. The partnership is “a service we offer to the customer, but it is turning into a profit center for us,” Moran says, “more so than what we’d anticipated.”

Ray Scenna, president of Laurel, Md.-based IQS, a Craftmark Homes subcontractor, says that while the hottest trend in tech-savvy homes is multi-room distributed audio, the company’s top seller is built-in speakers for the kitchen, family room, and master suite, followed by surround-sound and security systems. “Security is No. 3 on the list,” he says, “even before structured wiring.”

PUTTING OUT FIRES Builders point out that because high-tech options are more complicated to sell and install than other upgrades, it’s harder to realize a traditional 30 percent markup. “We don’t make a ton of money on home technology,” says Chris Weir, vice president and director of production operations at Brookstone Homes in Oconomowoc, Wisc. “We offer it more for the home buyer convenience of rolling it into their mortgage.” This fall, however, the company will roll out a new twist on home security—whole-house fire sprinkler systems. Brookstone currently is in the process of getting such a sprinkler system up and running in a model home. In addition to offering it as an option, Brookstone wants to install the sprinklers as standard in certain communities in order to qualify for municipal incentives allowing builders to increase the density of developments.

TOTAL PACKAGE: In addition to sleek wiring packages popular with buyers, builders are offering whole-house sprinkler systems, even displaying the non-invasive sprinkler heads in model homes. Brookstone is one of 10 builders across the country participating in a Built for Life pilot program, launched at this year’s International Builders’ Show, to put sprinkler systems in model homes in order to show buyers what’s involved in whole-house sprinkler integration. Although residential sprinkler systems have been around for years, their use is spreading from predominantly hot and dry climates such as Scottsdale, Ariz., to other parts of the country. Peg Paul, a spokesperson at the Home Fire Sprinkler Coalition (www.homefiresprinkler.org), which sponsors the project, says the systems can boost the bottom line of both builders and buyers. Homeowner insurance policies allow a 5 percent to 15 percent deduction on the fire line item. “Some policies will go as high as 25 percent if the sprinkler system is attached to a hard-wired system, with dispatch to the local fire department if the sprinkler goes off,” Paul says. In addition to being able to build houses closer together, builders who install sprinklers in each home in a subdivision are often allowed to put in narrower streets and eliminate one point of egress in the community.

“We’re seeing absolutely every market installing sprinklers, from home builders doing entry level to [home builders doing] $2 million houses,” says Alden Spencer of Affordable Fire Protection, which he says has outfitted more than 2,000 homes in Atlanta for builders such as D.R. Horton and KB Home. The sprinklers, which cost roughly $1.50 per square foot when installed throughout a development, operate off the household water-main through CPVC piping that’s run behind ceilings and walls. “It’s a calculated system that’s more technical than plumbing,” Spencer says. “We have to figure the demand on the system, work our way back to the supply, and work out the hydraulics. It often will require a larger meter and pipe size coming into the house.” He adds that concerns about extensive water damage are unfounded, since only the sprinkler that senses a fire will activate.

TECH TAKE-HOMES: About one in four builders say home technologies boost revenues, up from one in five last year. None of the builders surveyed said that home technologies had a negative effect on revenues. Rayco Development of Suffield, Conn., installed the sprinklers at Dallymeade, an 82-unit condo development on 23 acres in Windsor, Conn. With sales wrapping up this month on the $230,000 to $390,000 units, vice president Matthew Coppolo says the system has been well received by customers. “The sprinkler heads are so inconspicuous,” he says. “Although the Realtor explained them up front, at closing walk-throughs the buyers had to be reminded what that little disk is in the ceiling.” He says the sprinklers cost Rayco $5,000 a home, but with municipal trade-ups such as narrower streets and higher density, it was able to fit 15 extra units into the development. So if the average cost of a unit is, say, $300,000, that means the company spent a total of $410,000 in sprinklers to put an extra $4.5 million in its pocket from the sale of the additional 15 units. Now Rayco is exploring the profit possibilities of offering sprinklers as an upgrade in detached single-family homes.

Whatever the application, CEA’s research shows that home technologies are becoming bigger players in the marketing of new homes and, at least in parts of the country, a necessity for competing for buyers.

SOURCE: THIRD ANNUAL STATE OF THE INDUSTRY BUILDER TECHNOLOGY MARKET SURVEY, CONSUMER ELECTRONICS ASSOCIATION