Home alarms ring profits . . . All-Savers extension?
The bust in housing starts hasn't rung any alarms in one related industry: the home security business. Public perceptions of sharply rising crime have kept the order books of manufacturers of burglar and fire alarms as full as big-city police blotters. According to Tim Crow, vice-president and secretary of Rollins Protective Services Inc., headquartered in Atlanta, the growth in burglar alarms is running about 25 percent a year. At the same time, the FBI crime index - encompassing property crime, murder, rape, robbery, and motor vehicle theft - rose 9.4 percent last year.Skip to next paragraph
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''There is no doubt the home alarm market is tied to the crime, not the housing market,'' comments Ron Saladin, products manager for Honeywell Inc.'s security products division in Minneapolis. And, he notes, ''crime rises during a recession.''
George K. Broady, chairman of Network Security Corporation, a Dallas-based company, admits that sales of alarm systems in new homes are off, because of the deep slump in the housing industry.
''If there are fewer new homes,'' Mr. Broady says, ''there are fewer target markets.'' But he quickly adds, ''Alarm sales in general are holding up quite well.''
Alarm manufacturers also point out that only 2 to 4 percent of the 76 million homes in the United States have any form of alarm. Thus, there is enormous potential in the existing housing market.
Mr. Crow has a hunch that builders are not eager to install alarm systems in new houses anyway, since they want to give the impression that the house is in a safe and crime-free neighborhood. A further curb is the relatively steep price of new houses and builders' attempts to hold prices down. An alarm system can add another $2,000 to $10,000 to the cost of a house, depending on its level of sophistication.
The high cost of alarms, in fact, leads Mr. Broady to speculate that there's a large market for a good system in the $1,200-to-$1,500 price range. The main cost of a system is now installation.
The alarm companies could increase their revenues, though, even with a system that costs less, by increasing their monitoring revenues. Customers pay about $ 20 to $35 a month to have their systems monitored. If their alarm went off, the monitor would investigate why and report to the police if necessary.
Mr. Broady's company, which became publicly listed just last month, hopes to add another twist. It may monitor alarms on a nationwide basis using Weststar 3 and 4 satellites.
''The industry has been dominated by family-owned businesses,'' Broady says, ''and it has a real need to come together to be cost effective.'' By cutting down on the number of central stations needed to monitor the systems, Broady hopes to cut costs.
Each alarm company has its own monitoring station. Thus, in some cities there are up to 20 central stations. Broady predicts that through the use of satellites and computers, there will be only three or four central stations per city.
Another factor working for the industry is the incentive that insurance companies give to install alarm systems. According to Crow, with a professionally installed system an individual can negotiate with his insurance company and receive a 5 to 10 percent discount in home insurance as a preferred risk.
Despite the growing market for alarms, Rollins discovered that homeowners were not averse to ''ripping off'' the alarm companies. In its fiscal year ending June 30, 1980, Rollins reported a net loss of $3.3 million on revenues of ''We discovered that people living in $85,000 homes were stretched thin,'' Crow says, ''and decided that making monthly payments on their alarm systems was one of the first things they became delinquent about.'' Since then, Rollins has adopted a tougher and faster credit-checking system and made $1 million on $35 million in revenues in its latest fiscal year. Will the All-Savers certificate be an annual or a perennial?
The thrift and housing industry had high hopes that Congress would act on the Boren-Jenkins bill to extend the certificate from a one-year basis to being from three to five years. Such an extension, argued Leon T. Kendall, president of Mortgage Guaranty Insurance Corporation, could ''. . . produce moneys for a three- to five-year rollover with a fixed rate that could produce the kind of permanent money needed. . . .''
According to the office of co-sponsor David L. Boren (D), a senator from Oklahoma, the outlook for extension this session is bleak. ''We know the housing industry is not going to loan long term with the funds raised by the All-Savers, '' an aide says; ''but the outlook for this bill is pretty slim anyway.'' The senator plans to try again next year.