Home integrators know which doors to knock on despite slump
With the downturn in the real estate market showing few signs of short-term recovery, home integrators are adopting fresh strategies for generating revenue. Despite a minor slowdown in growth, however, integrators find their industry shielded, in part, by the clientele many of them serve.
The Joint Economic Committee in Washington, D.C., recently issued a report predicting 1.3 million foreclosures between mid-2007 and 2009, wiping out $71 billion of housing wealth. Although Treasury Secretary Henry Paulson said in late October that the United States still "hasn't hit the bottom" in the subprime mortgage meltdown, many home integrators are in a protected position.
"One of the reasons is because of the level of homes they're putting their systems in," said Bill Ablondi, director of home systems research for Parks Associates in Dallas. "In luxury homes, the subprime market is not a factor."
A large part of the market base home integrators serve represents a more experienced and financially secure homebuyer. "These integrators are certainly targeting a market that is healthy and insulated against something like a housing slowdown," he said. "It also depends on the class of homes being built, but best we can tell is they're still growing at a healthy rate."
A Parks Associates forecast predicts total residential revenue will experience a 12 percent growth rate over the next year. "Based on the work we've done, it continues to perk along at a 10 to 11 percent growth rate," Ablondi said. "While that's down from [the] 14 to 15 percent range we saw a few years ago, it's not tanking like some might expect."
To offset the decrease in growth, integrators have expanded their retrofit capabilities, Ablondi said. Though he's casually observed that homes on the West Coast are more likely to be "wired" than those on the East Coast or in the Midwest, Ablondi said homeowners who aren't investing in new properties are likely adding value to their own.
"It's about moving to where the market is," he said. "Technology like wireless capability makes it a little easier to retrofit, and the integrators are becoming aware of what the technological capabilities are." Furthermore, Ablondi said he sees this as an opportunity for certain home integrators to expand their retrofit portfolio. "Most are involved in a bit of that already," he added.
Tyler Jennings, president of Imperium Smart Systems, Pleasant Grove, Utah, said that while his company focuses on high-end homes, the slump has had a negative impact on the market in general. "We're able to continue to grow just because markets for $1 million to $5 million houses in Utah has not slowed at all," he said. "But ... I think there are some people getting more anxious."
Jennings recalled a recent meeting with a developer who decided on a full home theatre package for a $2.5 million spec house. "Builders are looking for something that differentiates their project from the one across the street," he said. He's also adopted the strategy of retrofitting homes, which provides the additional benefit of landing clients who had been ready to sell their homes. "I'm meeting with a client now who was going to sell but then when the market went south he decided to update the house he has now," he said. "And people are realizing more and more it's something they have to have in order to resell it."
That's a strategy Naples, Fla.-based home integrator Wireless Home has adopted successfully.
President Matt Peters said focusing on the retrofit market as well as specializing in many wireless solutions has helped his company keep busy. "If you can specialize in products and services that can be put in any home, without ripping out a lot of wires, you're likely that much farther ahead."