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CEA: Consumers’ Custom Desires Go Unmet

Arlington, Va. – Sales of custom-installed electronics systems to new-home buyers have soared in recent years, but sales could be a lot higher if builders and installers teamed more aggressively to educate new-home buyers about their options, a CEA study concludes.

The findings point to “a desire and need not currently being met,” said market research director Joseph Bates. He pointed out that future new-home buyers are showing even more interest in installed home technologies than recent buyers and that only small percentages of recent custom buyers first became aware of their options by talking to builders and installers. “Builders and installers must partner to offer information,” he said.

New strategies to identify and qualify the most likely buyers and to demonstrate available options will help builders and installers offset a forecast decline in new-home starts in 2006 and 2007, Bates added. The National Association of Realtors, he noted, forecasts a 3.7 percent decline in new-home starts (single- and multifamily combined) in 2006 and an 8.1 percent drop on 2007. They would be the first drops since 2000, according to Census Bureau statistics.

Demonstrations in model homes will be a key driver in raising adoption rates, Bates said. “Many consumers don’t get it until they see it.”

Among recent new-home buyers who didn’t opt for custom-installed home systems, “cost is not the major reason” that they didn’t buy, Bates said. For each category of installed electronics, the biggest percentages of non-buyers either said they had no need for the system or the builder didn’t offer it.

In fact, he said, many of these home buyers expressed “high levels of informed regret” for not buying one of these systems once they were informed about the systems. Once the recent new-home buyers were informed of the options available to them, “they are very interested,” Bates said. If they had been aware of their options when they bought their house, he said, the industry would have enjoyed 340,000 more multiroom-audio installs, 300,000 more home theater installs, and 360,000 more lighting-control installs.

For many technology categories, price expectations by likely home buyers are in line with average installed prices reported by builders, the survey also found. Those categories were structured wiring, multiroom audio, energy management and monitored security. On the other hand, “unrealistic price expectations pose challenges: in three categories — home automation, home theater and lighting controls,” Bates said.

Likely new-home buyers expect to pay $2,500 on average for home automation, but surveyed builders reported the average price of an installed system last year was $6,700, CEA said. Likely buyers expect to pay $3,600 for a custom home theater, but installed prices have averaged $6,200. And consumers expect to pay almost $1,900 on average for lighting controls, but last year’s average installed price was $6,100.

Although the number of installations is growing at double-digit rates, according to CEA’s recent builder survey, the penetration rate of select types of systems, including multiroom audio and home theater, is very low in newly constructed homes.

Surveyed builders who offer home technologies, for example, installed multiroom audio systems in 15 percent of the homes they built in 2005, up from the previous year’s 12 percent, which in turn was up from 8.6 percent in 2002, the CEA/NAHB survey found. Home theater install rates rose to 11 percent in 2005 from the previous year’s 8 percent.

The consumer survey of 1,000 recent and likely new-home buyers was conducted in May and weighted to reflect all U.S. new-home buyers. The survey of 279 builders, weighted to reflect the total builder population, was conducted in November 2005 in partnership with the National Association of Home Builders.