Smart Home Technologies Fit New Homes and Retrofits

Equipping a home with "smart" technology has become a trend among existing homeowners and new home builders, expanding beyond the early adopter/technology enthusiast marketplace. So-called smart homes use automated technology to provide enhanced functionality, monitoring, and control of systems within the home that increase the security, convenience, and comfort of its occupants, and can range from lighting controls, heating/air conditioning systems, entertainment systems, security systems, and integrated appliance or device-management systems.

According to the Consumer Electronics Association’s 13th Annual State of Builder Technology Market Study published in April, built-in home automation technology is growing strongly, and is being utilized as a point of differentiation by home builders. According to the study, eight in 10 homebuilders now offer clients features like structured wiring (84%), home theater systems (80%), and monitored security systems (80%).

However, the desire to incorporate smart technology into the home is not limited to new construction. Steve Koenig, senior director, market research for the Consumer Electronics Association cites the ubiquity of the smartphone as a key driver of the rise in demand for more centralized control over various systems and devices in the home. "The smartphone is the center of the [consumer electronics] universe today," he says. "It has become the controller of our lives."

The 2014 State of the Smart Home Report by Icontrol Networks found that 90% of respondents to the surveys on which the report is based indicated personal and family security is one of the most important reasons for using a smart home system, with 67% of respondents ranking it the number one reason overall for having a smart home system. A majority (51%) of respondents indicated they would pay up to $500 for a fully equipped smart home system, while a third (32%) expressed willingness to pay between $500 and $3,000.

"Connected things that tend to fall into a peace of mind category tend to rank at the very top," says Letha McLaren, chief marketing officer at Icontrol Networks, a provider of smart home platform technology that "enables home security companies, broadband service providers, and utilities to offer the next generation of home management, security and connectivity to their customers." Says McLaren, "Home security, or property or family protection, are what get people to purchase" smart home technologies.

Building a smart home from scratch is often more expensive than simply retrofitting an existing home, largely because such installations are generally high-end affairs, integrating a host of new technologies at once, including state-of-the-art lighting; security cameras; heating, ventilation, and air conditioning (HVAC), and entertainment-control technology. A recent comparison of various installed smart-home setups pegged the costs at roughly $2,500 for a bare-bones setup, rising to nearly $2 million for a luxurious, over-the-top system that would put George Jetson’s home to shame.

Still, determining an average cost of smart home installation can be tricky, because of the high degree of variability in the level of functionality included, the quality of components, and the level of system integration between various systems. Furthermore, a premium is usually paid for the installer to set up the system and instruct the homeowner on how to use it and, in the event of a problem, to serve as the single point of contact for the homeowner, instead of needing to deal with multiple device vendors and service providers.

That is why, according to industry watchers, the market segments that appear to be gaining the most traction now are the somewhat less-expensive do-it-for-me (DIFM) and do-it-yourself (DIY) markets, which allow the homeowners to pick and choose the smart systems they want, and often upgrade simply by adding a wireless controller, rather than needing to replace entire lighting, climate control, or appliances with "smart" versions.

The DIFM market is populated by service providers that already have a presence in the home, such as cable television (like Time Warner Cable and its IntelligentHome service), telecom (Comcast and its Xfinity Home service), and home security (ADT and its ADT Pulse service) companies. These providers bundle together disparate smart home technologies (such as security, lighting, heating and air conditioning, appliances, and media), and provide a single front-end application that allows the homeowner to control these systems via a computer, smartphone, or tablet. Pricing generally ranges from about $15 per month for a bare-bones system to more than $45 per month for a multifunction system that also includes security monitoring services.

The DIY market is largely driven by consumers seeking to make their homes smarter, but without needing to spend the time and resources to have a custom-installed, permanent system. The MakeUseOf blog, in a post assessing "how much does a smart home really cost?" compiled a smart home system consisting of commonly desired features including a smart lighting controller, a smart climate control system, and a smart security system, resulting in total cost of about $1,400 (though adding smart entertainment options drove the total price tag to more than $3,700).

Koenig suggests the smart home market could follow a development path similar to that of the in-car GPS marketplace, in which people initially purchased stand-alone GPS devices, became familiar with their benefits, and then came to see the value of a built-in GPS system, which has become an available option in many vehicles.

Indeed, major lifestyle technology companies such as Apple, Google, Microsoft, and Samsung each are offering front- and back-end technology designed to link disparate smart and older devices in the home and provide a common application to easily control them all.

"We’re going to have aftermarket solutions that will get around [not having fully connected or smart devices in the house]," Koenig says, noting that the development of aftermarket products that provide some smart functionality or connectivity likely will be the catalyst for driving the demand for devices with built-in smart functionality.

Says Koenig: "[Aftermarket products] are what will grow the marketplace, and then spur the future purchase of connected appliances."

Keith Kirkpatrick is principal of 4K Research & Consulting, LLC, based in Lynbrook, NY.