For Many Builders, Smart Homes Now Come Standard

When C.R. Herro talks about Meritage Homes’ standard smart house features, he doesn’t start with the Wi-Fi enabled video doorbells, light switches, thermostats, smart door locks, advanced garage door openers, or weather-sensing irrigation systems included in the firm’s branded M.Connected Home. Instead, Herro, vice president of environmental affairs at Scottsdale, Ariz.–based Meritage, talks about a hypothetical 36-year-old soccer mom.

“I think that’s who you really want to focus on,” Herro says. “It’s not about starting with the technology. It’s about catering to that 36-year-old mom, and figuring out what inspires her, what she will truly use, and what will make her life better.”

For Meritage, that means Ring video doorbells; Kwikset Kevo door locks; smart lighting from iDevices and Leviton; irrigation controllers from Rachio, Hunter, Rainbird, and Toro; garage door openers from LiftMaster; and smart thermostats from Aprilaire. Those devices now come standard in the firm’s M.Connected Home Automation Suite, along with Amazon’s cloud-based voice service, Alexa, and its Echo smart speakers.

All of it is backed up by a white-glove activation service carried out by Amazon Smart Home Services employees, who meet homeowners 25 days after closing to make sure all devices are working properly, and to educate them about any unlocked functionality. “The overwhelming process that happens at closing doesn’t allow for a lot of capacity to know how to work your Kevo door lock,” Herro explains. “So we’ve actually shifted our Amazon process to this post-close review process.”

Meritage isn’t alone when it comes to new-home builders including smart technology as standard in its houses. In 2017, Lennar threw down the gauntlet for smart home technology as standard in new homes by including it in its Everything’s Included approach, centered around its Wi-Fi Certified homes package.

Today, Lennar includes as standard an Amazon Echo Show and Dot, a Ring video doorbell, a Honeywell Wi-Fi thermostat, smart door locks from Kwikset and Baldwin, lights from Lutron, music from Sonos, and a Samsung SmartThings hub that integrates with Amazon’s Alexa interface to run it all. The home builder took its partnership with Amazon up a notch in May by rolling out Amazon Experience Centers in Lennar model homes across the country. The builder also includes a visit from an Amazon Smart Home Services employee to help homeowners set up their smart home tech, with an additional 90 days of free support.

“For us, it really represents a three-tiered approach,” says David Kaiserman, president of Lennar Ventures. “The Wi-Fi certification, the smart devices in our homes, and then the activation and service by Amazon, which really represents that next step of living.”

Kaiserman shares Herro’s sentiment about making sure any standard smart technology package meets homeowners’ real-world needs, without overwhelming them. “Don’t try to scare them with the power of technology and tell them how it’s going to radically change their lives,” Kaiserman says. “We’ve put a lot of technology into our homes, but at the end of the day, it provides simple solutions to real-world problems.”

Smart All OverMeritage and Lennar are just two examples of what’s fast becoming a smart home arms race for new-home builders. PulteGroup announced in July that all Pulte, Centex, Del Webb, DiVosta, and John Wieland Homes and Neighborhoods would feature built-in Wi-Fi access points and direct wiring throughout to ensure robust connectivity for an array of products.

Then, in September, KB Home announced a partnership with Google that ties together the front doorbell, door locks, thermostat, appliances, light controls, window shade motors, and other personalized functionality through a Google Wi-Fi mesh network, powered by Google Assistant and activated through Google’s Home and Home Mini smart speakers. The partnership also includes white-glove service from DISH Smart Home Services after move-in.

Not to be outdone, TRI Pointe Group in October announced its own partnership with Amazon to offer its HomeSmart suite of state-of-the-art home technology and automation features as standard in its new homes.

It’s also not just the big production builders that are upping their tech game: In November, California builder RC Homes announced it is pre-installing the ELAN smart home automation system in 27 homes across three new Los Angeles communities. That news came directly on the heels of Houston-based McGuyer Homebuilders unveiling a partnership with Control4 to install a standard smart home package that includes an Amazon Echo Dot voice device, and a wireless access point extender for whole-house capability. Other regional builders, such as Mandalay Homes in Arizona and Dallas-Fort Worth builder Our Country Homes, have also rolled out their own smart home packages.

Standard PracticePut it all together, and it quickly adds up to smart home tech being a must-have amenity—often offered as standard. “There’s just an expectation that you will have some kind of smart capabilities in your home today,” says Diahann Young, director of digital platforms at Pulte. “I compare it to having Bluetooth or power windows in a new car. You might not have had it as standard 10 years ago, but you almost can’t buy a car without that functionality today.”

That’s a huge shift from just two years ago, when betting on the ever-changing landscape of smart home automation seemed a risky endeavor that was perceived as too expensive for the average home buyer. But with the explosion of smart home hubs such as Amazon Echo, Apple HomePod, and Google Home Hub, all of which can run a plethora of devices from security systems and appliances to sprinkler heads and thermostats, smart home tech has suddenly been introduced en masse to the masses, with all signs pointing to the public wanting more.

In the interim, smart home technology has penetrated American households at a blistering pace. According to Statistica, 32% of all homes already had some smart home technology in 2018, and more than half—53%—will by 2022. Meanwhile, an independent study conducted by John Burns Real Estate Consulting found more than 40% of new-home buyers purchased homes with smart tech features in 2017; and that about 60% of new-home shoppers said they are willing to pay more for smart features.

“Just as appliances, paint colors, countertops, and flooring have always been key decisions in the home design process, smart home technology is now becoming an equal consideration by designers and homeowners alike,” says Brad Hintze, senior director of product marketing at home automation company Control4.

Observers point to Apple, Google, and Amazon diving head first into the smart home tech space as a big propellant of consumer demand for these products. “The biggest ‘disruption’ that the tech giants have caused is simply making home technology more accessible than ever before,” says CEDIA’s Giles Sutton. “They’ve dramatically increased the public’s awareness of what is possible.”

For Many Builders, Smart Homes Now Come Standard

Ryan Henderson, director of purchasing at Our Country Homes, says that focus and increased awareness, combined with the plug-and-play simplicity of many of today’s smart home gadgets, has flip-flopped the algebra in an area that was once perceived as overly complicated and expensive.

“From a builder’s perspective, companies like Amazon and Google have really made it almost too easy to automate a home,” Henderson says. “They’ve invested the time and resources so that smart home tech is now out there for almost any type of product, any of which now work on most platforms.”

Affordable AdvancesThat widescale adoption, meanwhile, has gone a far way to driving down the price of putting this type of technology inside homes today.

“The experience of using your smartphone to turn off the lights, draw the blinds, or adjust the temperature would have cost thousands of dollars a few years ago,” says Adrian Adriano, vice president of strategic initiatives at Xfinity Communities. Today, that same smart home tech can be had for just hundreds of dollars.

“There’s no doubt that the $100 Ring doorbell is more expensive than the 50-cent doorbell it replaces,” says Herro. “But for less than a thousand bucks a house, you can put in a Wi-Fi hub and key elements like lights, locks, thermostats, garage door openers, and sprinklers to create a solid foundational approach, and really give people the bones of a good home automation system.”

The smart home tech that KB Home highlights in its Google partnership is estimated to add just $600 to the price of a home. That small price tag suddenly allows new-home builders to differentiate themselves from existing homes in a big way, without breaking the bank. From that perspective, offering smart home tech as standard in a new build becomes a no-brainer—retrofitting an existing home to operate in the same way would require major wall and attic surgery, at a much higher cost. But for new-home builders, heat-mapping a home to ensure robust Wi-Fi coverage is designed in from the start, and then inclusion of the smart gadgets that are quickly becoming the apple of consumers’ eyes isn’t nearly as difficult, or expensive.

“Honestly, our crews have to pull the wiring anyway,” says Young at Pulte. “So there’s a tremendous value from a consumer standpoint. We see it as a worthwhile investment, no matter what it is, because it allows us to give our buyers what they want today.”

Expanding MarginsPutting in the basics without breaking the bank also means builders can set up a foundational system that can be expanded, creating opportunity for increased profit centers as well.

“It’s no secret builders make their money off of upgrades and options,” says Christa Amidon, a residential construction recruiter at Berkley, Mich.–based Birmingham Group, who’s worked at both production and custom home building companies. “This is an area that can be upgraded so a builder can make more money.”

She says in her market in the Detroit metro area, smaller upgrades of $1,000 to $2,000 run at about a 50% margin, with larger upgrades of several thousands of dollars in home automation garnering around 35%. Adds Xfinity’s Adriano, “Ultimately, the right smart home partner will provide the support and resources builders need to help sell homes faster, and with the best possible margins.”

Yet, while the market forces are drawing technology into the living rooms of America’s new homes at a breakneck pace, for new-home builders, picking the right partners is still as much of an art as it is a science. Read more about choosing the right partner here. Making sure you pair up with the right trade partners comes down to knowing who you want to be in this space, and deciding whether you want your homes to be an open or “walled garden.” The announced home builder partnerships with Amazon, and KB’s partnership with Google, are notable because they allow consumers to choose what type of technology they want to employ after the fact. While Apple relaxed its initial requirement that device manufacturers install a proprietary chip in their smart accessories to work with the Apple HomeKit, consumers still need an iOS device to run Apple’s Home app to control it all.

Ironically, that walled garden approach has led to fewer HomeKit-compatible devices in the marketplace, which, according to a report from tech news site The Information, has allowed Amazon to leapfrog past Apple on the smart home front, even though Apple got a head start in 2014. But since then, builders who originally planted flags in Apple’s walled garden—including Lennar and Meritage—have now opted for an open garden approach just as home tech achieves mass market penetration.

“We didn’t go with Apple because they are closed source, which forces you into a very prescriptive partnership with the other components you, or your homeowners, can add,” Herro says. “We didn’t want to do that. But I would also say, whatever you decide on today is going to be outdated in three years, regardless. So what’s really important is to pick a partner who’s on the same page and not walk into a closed-source infrastructure, so you can adapt in the future.”

The Big ThreeIf you decide to partner with Amazon, Google, or Apple—currently the big three in the smart home space—look to your own objectives to help pick the right one.

“As you look at the technology companies out there, there is a material distinction in their approach,” says Kaiserman. “If you go with Apple and you have an issue, you visit one of their stores. If you go with Google, you’re more likely to interact with them through the computer. If it’s Amazon,” Kaiserman continues, “they are going to come to you, which is the reason we picked them. The service model is a very necessary component to look at.”

As many big production builders are finding out, it’s hard to bet against the heft and weight of the tech giants. “Platforms like Google, HomeKit, Alexa, or Samsung SmartThings have resources that many smaller brands don’t have access to and can offer more product variation in all the important categories a resident will care about,” says Garrett Van der Boom, director of global business development at Samsung. “We’ve found that having a brand name a customer recognizes is very important to a builder’s sell-through, and smaller platforms don’t carry the same kind of perceived value.”

At Meritage, Herro has a similar outlook. “We did pilots with a lot of the smaller companies when they came onto the scene, and they have some interesting value propositions,” Herro says. “But some of them are just so painfully small compared to the big three that they are obviously going to get bought or get crushed. So as much as I hate to say the big box retailers are going to win, I think the big box retailers are going to win. If someone has a better idea, they will just eventually become [a part of] Amazon or Google or Apple.”

Across the board, though, observers say the best partners are the ones that will meet with your buyers to discuss the technology. “Of all my trade partners, my home automation suppliers were the only ones who we allowed to meet directly with our buyers,” says Amidon from the Birmingham Group. “They can talk about all the components they can bring in to enhance the home way better than I can, so you really need that partner who can work directly with them.”

Sounds like the perfect match for that 36-year-old soccer mom.