The housing market may be struggling, but consumer electronics in homes is surging. That's the crux of the results from a new study from the Consumer Electronics Association (CEA) and the National Association of Home Builders Research Center.

There are so many strong pieces of data to report from the 5th Annual State of the Builder Technology Market Study that it is difficult to hone in on just a few, but some of the key results are:

• More builders than ever are offering home technology, led by an amazing 87 percent offering structured wiring … a technology category that barely even existed a decade ago. (see chart 2)
• The penetration rates for various technologies in new homes held steady and slightly increased in 2006, defying the idea that builders would cut back on tech amenities as home sales slide. (see chart 1)
• Marketing home technologies is more important than ever before. In fact, 84 percent of builders report that marketing home technology is important.
• On the flip side, most builders are not actively marketing home technology. No builders are proactively marketing technology in the homes they build and only 8 percent say they provide information to homebuyers on request.
• Four out of every 10 builders say home technologies are having a positive impact on their revenues. That is up from three in 10 in 2005 and two in 10 in 2004.
• Although builders still employ security installers (65 percent) and electrical contractors (63 percent) in large numbers to install home technologies, they are now employing custom installers with the same frequency (62 percent). Just two years ago, only 34 percent of builders were using these specialists.
• Custom integrators have the highest satisfaction rate among homebuilders (89 percent). Security installers have an 83 percent satisfaction level, followed by electricians (75 percent), major retailers (70 percent) and utility companies (54 percent).
• Finally, the primary reason reported by builders who do not install home technology continues to be “not much consumer demand.” However, even those builders who have not jumped onto the technology bandwagon yet are seeing cracks in their armor, as the percentage that report lack of demand decreased across the board in every technology category. Lack of profit, the inability to find an installer and lack of education are the other primary reasons why builders don't install home tech.

Analyzing Trends in Home Electronics

The data was the topic of conversation at the Electronic House Expo (EHX) Spring trade show in Orlando in early March. Steve Koenig and Shawn Dubravac of the CEA led a series of discussions among custom integrators about how they can help builders bolster their home technology offerings even more.

According to Koenig, new home starts were down in the month of January 2007 by 40 percent compared to January 2006. Citing CEA and NAHB data, Dubravac said that the decline in housing starts is expected to moderate throughout 2007, but not turn positive until 2008.

The duo presented some interesting data in regards to homebuilders based in the South. While nationally 62 percent of builders are using custom installers for their home electronics, only 46 percent of Southern builders are. Moreover, fewer builders in the South allow their home electronics contractor to meet directly with the homebuyer than in any other region of the country. It's not like they can't find installers ... only one percent of Southern builders had unmet installation needs.

Meanwhile, consumer electronics continue to boom. The consumer electronics industry is expected to grow 6.5 percent in 2007 to $155.2 billion. That growth is compared to double-digit growth the past two years (13.1 percent in 2006 and 10.1 percent in 2005.

According to Koenig, some of the primary consumer electronics trends include:

• Convergence—Products from the IT world are merging with products from the A/V world, driven by the iPod.
• Design—New colors, shapes and sizes for electronics are cropping up constantly.
• Seamless Integration—The proliferation of in-wall and in-ceiling speaker systems is an example of how electronics are changing to meet the needs of buyers.
• Digital Content—The changeover from CDs to MP3s and the migration from VHS to DVDs show that analog content is going away.
• Ubiquitous Access to Media—Consumers today expect to have access to communication and entertainment at all times. This is characterized by iPods, Blackberries and even multiroom audio/video systems.

As part of the EHX session, integrators recommend that when working with builders they need to maintain their prices and margins, especially in the wake of rising copper costs. They also recommend that builders seek out good/better/best packages for home electronics, and that a 30 percent builder-margin on electronics is reasonable, but any higher could be tricky.

The complete study is available for purchase on the CEA Web site at www.ce.org.