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Some Custom Segments Flattening, Others Growing: CEA Survey

Arlington, Va. — Growth in some segments of the custom installation market have begun to flatten, but other segments are gaining momentum, according to a home builder survey conducted by the Consumer Electronics Association (CEA) and the National Association of Home Builders (NAHB).

In their fifth annual State of the Builder Technology Market study, the associations found that the percentage of home builders offering multiroom audio systems, home theater and structured wiring systems as standard or optional in 2006 seems to have hit a plateau, although a lofty one, after five years of gains. The percentage of builders offering automated lighting controls, home automation (including central vacuums), and energy management continued to rise, however, in the nationwide survey of hundreds of builders.

All told, the total number of builders offering one or more home technologies grew to 87 percent in 2006, up from 82 percent in 2005, slightly lower than 88 percent in 2004, but above the 76 percent and 79 percent levels in 2003 and 2002, respectively.

The survey also shows the percentage of new homes sold with multiroom audio, home theater, structured wiring and lighting controls grew slowly in 2006 compared with 2005.

With the slowdown in new home construction in 2006, the study contends that the flattening percentage of installation rates yielded “a decline in total installations in all categories” in 2006. “Clearly, the tough times for new home construction seen in 2006 will be felt in 2007 by installers of home technologies unless the penetration rates for all home technologies surge forward,” the report continued.

To reach its conclusion that the actual number of installs fell in 2006, CEA combined NAHB new-home construction statistics with survey results on the percentage of new homes getting installs. CEA concluded that 1.02 million new homes were outfitted in 2005 with structured wiring, falling to 960,000 in 2006. Multiroom audio was installed in 310,000 new homes in 2005 but only 290,000 in 2006. Home theater installs fell from 230,000 in 2005 to 220,000 in 2006. However, CEA’s totals don’t reflect retrofit installs in existing homes undergoing remodeling

The declines came despite a finding that “for the first time ever, all home technologies CEA tracks are being offered by at least half of all home builders.” The three technologies that were offered by a majority of builders for the first time in 2006 were automated lighting controls, home automation and energy management. In 2006, they were offered by 57 percent, 51 percent and 52 percent of builders, respectively.

In 2006, the survey also found the percentage of builders offered multiroom audio as standard or optional remained at 74 percent compared with 2005, but the percentage remains up from 2002’s 57 percent. A total of 73 percent offered installed home theater systems in 2006, up from 2005’s 69 percent and 2002’s 55 percent.

With more builders marketing the custom-install option, installation rates continued to rise in all categories but home automation and energy management. Surveyed builders who offer home technologies installed multiroom audio systems in 16 percent of the homes they built in 2006, up from 15 percent in 2005 and 9 percent in 2002. Home theater install rates rose to 12 percent in 2006 from 2005’s 11 percent and 2002’s 9 percent.

Install rates are rising, and more builders are offering home technologies, but builders are not proactively marketing custom systems “despite the importance that home builders place on using home technologies in the marketing of their new homes,” the survey found. In fact, the survey concluded, most builders do nothing at all to market technology. “No builders are proactively marketing new home technologies, and very, very few are even providing information to home buyers on request,” the survey concluded. “Instead, home builders are relying exclusively on the installation contractors to market and sell home technologies to new home buyers.”

One of the driving forces behind home-technology install rates, the survey found, were requests by buyers and specification by the architect.

Although technology and volume are driving down the cost of hardware, new-home buyers seem willing to spend more than ever on home technology. The typical price of a multiroom audio system rose in the latest builder survey to $2,800 in the 2006 survey from $1,300 in the 2004 survey. Typical home theater prices jumped to $7,700 from $4,800 in the 2004 survey. Lighting control prices rose on average to $6,900 from $5,500 in 2004, and monitored security rose to $2,000 from $1,100 in 2004.

The rising costs might be related to increasing labor expenses, CEA said.

Figure 1

*As a percentage of homes built in specified years by all surveyed builders.

Source: 5th annual State of the Builder Technology Market developed by CEA, NAHB

Figure 2

*As a percentage of homes built in specified years by all surveyed builders.

Source: 5th annual State of the Builder Technology Market developed by CEA, NAHB

Figure 3

Source: 5th annual State of the Builder Technology Market developed by CEA, NAHB