📉 Smart Homes Vs. A Slowing Economy

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📉 Good afternoon and Happy Thursday. The US has been teetering on the brink of a recession for months. Here’s what this means for the state of the smart home industry…

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Smart Homes Vs. A Slowing Economy

For the past several months, America has been teetering on the edge of a recession. Needless to say, this sluggish economy is likely slowing the pace of smart home adoption.

To start, over the past two years, the country has been experiencing some of the highest inflation in decades. Americans are finding themselves spending more on staples like groceries, gas, and housing. This means that they have less cash to spend on “for fun” things like a new Amazon Alexa or Google Nest. In fact, this is exactly what Best Buy CEO Corie Barry said during the company’s latest investor meeting.

During this meeting, the major tech retailer reported a 10% reduction in sales compared to last quarter. While this isn’t directly indicative of smart home sales, it’s a sign that consumers are spending less on tech gadgets than they were last quarter.

That said, inflation isn’t the only factor contributing to a slowing smart home industry.

Declining Home Sales

Another major factor impacting the sales of smart home appliances is a decrease in the sales of homes in general. Home sales are often viewed as a barometer for the sale of smart home gadgets since the two are so closely intertwined.

Think of it this way – if a person has lived in the same house for decades then they are probably set in their ways and aren’t very likely to start stocking up on a new Alexa, home security system, and smart lights. But, if a person just moved then they are more likely to consider enhancing their new house with the latest smart home gadgets.

For most of 2021, the average 30-year fixed mortgage rate hovered around 3-3.5%. But, in 2023, this mortgage has nearly doubled to over 6.5%. Since it’s more expensive to buy a house and take out a new mortgage, fewer people are motivated to move. The result is that, in April, sales of existing homes were down 3.4%. This was a 23.2% decrease year-over-year.

Looking Forward

Despite the relative difficulty over the past two years, Best Buy’s CEO expects the end of this year to be the bottom of tech’s recession. For companies building smart home products, like Amazon and Google, the silver lining is that they have a little more time to enhance their products. Mainly, this means ensuring that all new and existing products are compliant with Matter, the movement to make different companies’ products compatible with each other.

In other words, even if consumer demand is stalling slightly, product innovation can continue progressing up and to the right. When it comes to the adoption of the smart home, it’s likely still a matter of “when” – not “if”.

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