Residential Ready to Rally Around New Services
IP-based services and mobile apps that allow consumers to control and stay connected to their homes are expected to anchor a key market adrift in economic uncertainty. SSI‘s 2011 Residential Market Report provides research from Parks Associates to help security contractors take hold of these opportunities.
The latest housing numbers available at press time can be accurately depicted as a rollercoaster ride for anyone who plies a trade in the residential marketplace.
In a positive sign for housing, residential construction jumped 15 percent in September, well above the 3.3-percent increase economists had predicted, according to the Department of Commerce. Yet the increase in September’s housing starts was largely due to starts for new apartment buildings, which trend higher when consumers have less money to purchase single-family homes. These “multifamily” unit starts rose 53 percent from August to September, while single-family starts ticked upward only 1.7 percent.
From September 2010 to September 2011, single-family construction starts in fact decreased 4.9 percent, to 425,000. While the adoption rate for a security system remains about 40 percent in new single-family starts — the highest rate of adoption for any housing segment — the unit volume is paltry compared to previous years. In 2005, just prior to the housing bubble collapse, housing starts topped out at 2.1 million, with 1.7 million of them being single-unit homes.
Unfortunately, there are few economists or indicators pointing to any quick turnaround; it may well be late 2013 before a noticeable pickup occurs. Simply, the demand for new single-family homes remains low given the surplus of existing distressed homes that offer competitive prices, economists say.
The National Association of Realtors announced last month that existing-home sales, including single-family, townhomes, condos and co-ops, declined 3 percent to a seasonally adjusted annual rate of 4.91 million in September from an upwardly revised 5.06 million in August. On a more positive note, existing-home sales are 11.3-percent above the 4.41 million unit pace in September 2010.
While home prices continued to trend downward on average by a few percent, this news bodes well for independent installing security contractors: The second highest rate of monitored security adoption, 22 percent, is among consumers moving into newly purchased existing homes. Sometimes these householders are the first to adopt a monitored security system. For other householders whose newly acquired home has an existing security system, the move-in is a logical time to upgrade or replace an aging system.
It is too early to know whether or not the monitored security adoption rate of 22 percent for existing homes sold in 2011 will hold steady. But Dallas-based research firm Parks Associates anticipates that even if the adoption rate sheds a few points, it will still represent a solid set of opportunities for security contractors. Even better are the historically low mortgage rates, leading to high volumes of refinancing by owners with solid credit, and potentially even more buying of existing homes by those families still on the prowl for a well-priced home at an affordable rate.
Noteworthy are the latest results from SSI‘s annual Installation Business Report (IBR), which will be published in the 2012 Gold Book, an industry resource guide distributed with the December issue. For the second consecutive year the residential market posted increases in the average number of security contractors’ monthly installations. The residential sector (35 percent) has picked up 2 percentage points each of the past two years from the overall security business pie that also includes the commercial (44 percent) and industrial (21 percent) markets.
Despite the uncertain outlook in housing sales, Parks Associates estimates between 10 to 20 percent of installing security contractors are wisely expanding their portfolios beyond traditional security. Different dealers are choosing different options but key areas include entertainment installation, remote video monitoring and automation offerings.
Forming the basis of SSI‘s 2011 Residential Market Report are the latest findings of two surveys conducted by Parks Associates. In March/April the firm surveyed 10,000 broadband households, and in June/July 2,500 broadband households. The findings presented here follow surveys completed at least once per year between 2003 and 2011. Respondents were queried about the presence of security at home, providers used, satisfaction, among other information.
Selling IP-Based Home Services
Increasing consumer awareness for and desire to remain “connected” to their homes is proliferating across expected and unexpected applications. Powered by smartphone apps and other Web-enabled mobile devices, consumers are embracing and now demanding “anywhere, anytime” capabilities.
For premise security, IP-enabled features finally offer the opportunity to provide benefits well beyond intrusion and fire alerts at prices affordable to middle-income earners and above. These services allow consumers the ability to lock doors remotely, view video feeds from networked cameras, as well as set, adjust and control lights, smart thermostats and appliances.
Households that already have monitored security systems can be considered low-hanging fruit. The chart titled “Percentage of U.S. Households With Monitored Security” below provides a historical comparison and forecast for monitored security from 2003 through 2012. While the housing market drops of 2008 and 2009 are stabilizing, everything points to a slow recovery; strategies to thrive in that environment are essential. As the economy recovers, smart strategies may allow a surge of growth.
Certainly ADT and other large security providers such as Vivint (formerly APX Alarm) have aggressively targeted remote security and home automation services. They aim to meet those latent or known desires for their current and future customers with the addition of IP services. Telecoms and cable companies such as Verizon and Comcast are entering the marketplace as well to offer similar services.
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