Don't overlook the "FTTH factor" when pricing the fiber-connected home.
By David Meis
Corning Cable Systems
If you've recently placed your home on the market and are one of the lucky few in this country to be served with fiber to the home (FTTH), then you may have a little bonus headed your way. As FTTH deployments continue to escalate across the land, there is growing evidence that points to an increase in home valuation as a result of this ultra-broadband amenity. In many cases, real estate appraisals and selling prices for homes connected with fiber are outpacing their copper-served brethren. If you fall into this category and you didn't factor an optical fiber connection into the selling price of your home, then you may need to have a talk with your realtor.
To grab the attention of prospective homebuyers these days, as most realtors will preach, sellers need to differentiate. And while this is probably not news to anyone, the difference today is that tangible action is required to come out ahead in the market, whereas the mere allusion to differentiation sufficed over the past few years.
The degree of differentiation has been forced to evolve as well. In the not-so-distant past, the advertisement of such in-home amenities as custom kitchens, elegant tile, and large master suites turned plenty of heads. Similarly, communities promoting perks such as pools, lighted walking paths, and parks were quite successful in luring prospective buyers away from those without these features. Today, however, many of these items are becoming table stakes, requiring homeowners and developers alike to search for the next wave of enticing amenities.
A rising trend along these lines is the recent promotion of smart, or technology-enhanced, homes. This description encompasses a wide array of features, from automated home control systems to centralized media gateways and beyond. But one thing that smart homes all have in common is their tremendous need for bandwidth. And the kind of bandwidth that allows a smart home to truly perform isn't delivered via copper cables. Fiber-optic cables are becoming the medium of choice to enable the earth-shattering experience consumers are coming to demand and expect.
Measuring value
FTTH is now being touted as a value-enhancing amenity for many homes, as well as for developments. Not only is there talk of FTTH commanding a premium in selling price; there is also strong emerging evidence that supports this claim. Since FTTH deployment activity in the United States has ramped appreciably only over the last three years, it has been difficult to compile sufficient real estate sales data in a given locale to analyze and isolate the true effect of FTTH on home values. We're in the early stages of crossing a threshold where FTTH has been deployed long enough to extract a meaningful sample set of data.
Previous analyses of the effect of FTTH on home valuation have been intriguing, but skeptics could easily poke holes in most of these studies, leveraging the argument that the results were strictly tied to the local real estate market and did not apply elsewhere in the country. For example, one such study looked at homes in Southern California that were served with FTTH, with very favorable results reflecting significant value increases for these particular properties. However, it's fairly unanimous that the same rules of home valuation in the once-hottest real estate market in the nation don't apply to most other parts of the country. So readers were left to wonder: Were these attractive valuations exclusively linked to the super broadband amenity, or was the contribution of FTTH to these values masked by additional overriding factors in a market where frenzy was the default mode of operation?
Recognizing the implicit limitations associated with data surrounding recent FTTH deployment activity, an attractive location was selected for a recent study that had a bit more of a universal application to the rest of the country. That location happens to be Keller, TX. Keller is a thriving suburb of Fort Worth, with the demographics and cost of living reflecting many similarly sized cities across the country.
Beyond the fundamental statistics, Keller is also particularly attractive for an analysis such as this because the two largest telephone companies in the nation each have territories in the city. One of these service providers has extensively deployed FTTH throughout Keller, while the other has maintained a DSL service strategy in the area. This dynamic permits an apples-to-apples comparison of nearly identical developments situated literally across the street from one another. All of the other key comparison factors, such as home size, construction style, lot size, school and tax districts, and other factors are effectively equivalent across the developments. The only significant differentiating variable, then, is whether or not a home has access to FTTH service.
In the study conducted in late 2006, 50 homes having FTTH network access and another 50 homes with only DSL access were compared. The homes were carefully selected to ensure as many of the comparison factors as possible were similar, such as location, heated square footage, the number of bedrooms and baths, and so on. The results of the analysis strongly support claims that FTTH does, in fact, increase the value of a home. The key conclusions from the study are as follows:
- The average market price for homes having FTTH access was 8.6% higher than homes without FTTH access.
- The most recent appraised values of homes having FTTH access were 4.5% higher, on average, than homes without FTTH access.
- The homes having FTTH access in this study all experienced increases in appraised value from 2005 to 2006, while none of the DSL homes increased during this same period of time.
David Meis is market development manager at Corning Cable Systems. He can be reached at [email protected].