What is a 'Smart Home'

A smart home is a convenient home setup where appliances and devices can be automatically controlled remotely from any internet-connected place in the world using a mobile or other networked device. A smart home has its devices interconnected through the internet, and the user can control functions such as security access to the home, temperature, lighting and home theater. Related terms include "home automation" and "smart building."

BREAKING DOWN 'Smart Home'

A smart home’s devices are connected with each other and accessible through one central point – a smartphone, tablet, laptop or game console. Door locks, televisions, thermostats, home monitors, cameras, lights and even appliances such as the refrigerator can be controlled through one home automation system. The system is installed on a mobile or other networked device, and the user can create time schedules for certain changes to take effect.

The global home automation market in 2016 had an estimated value of about $36 billion, and with the growing adoption of internet-enabled devices, it's been forecasted that the market could reach revenues of as much as $80 billion by 2020. Growth in the broader home automation market, however, has faced challenges due its convenience-driven, as opposed to necessity-driven, nature.

Characteristics of Smart Homes

Smart home appliances come with self-learning skills whereby they can learn the homeowner’s schedules and adjust as needed. Smart homes enabled with lighting control allow homeowners to reduce electricity use and thus benefit from energy-related cost savings. Some home automation systems alert the homeowner if any motion is detected in the home while away, and some can call the fire department in case of imminent situations. Once these smart appliances have been connected, we have an example of what we call Internet of Things (IoT) technology. 

Smart homes can feature systems that are wireless or hardwired. Wireless systems are cost-friendly and easier to install while hardwired systems are seen as more reliable and are typically harder to hack. While hardwired systems are also more expensive than wireless options, installing a hardwired system can increase the resale value of a home. Installing wireless home automation with features such as smart lighting, climate control and security can cost a couple thousand dollars. Meanwhile, luxury and hardwired options can cost homeowners tens of thousands of dollars.

Risks of Smart Homes

While the smart home brings with it convenience and cost savings, security risks and bugs have been challenges faced by the technology. Adept hackers, for example, can gain access to a smart home's internet-enabled appliances. In October 2016, a botnet called Mirai infiltrated interconnected devices of DVRs, cameras and routers to bring down a host of major websites through a denial of service attack, also known as a DDoS attack. Measures to mitigate the risks of such attacks include protecting smart appliances and devices with a strong password, using encryption when available and only connecting trusted devices to one's network.

RELATED TERMS
  1. Smart Money

    Smart money is the capital that is being invested or withdrawn ...
  2. Home Warranty

    A home warranty is a contract that covers the cost of maintaining ...
  3. Smart Assets (Cryptocurrency)

    Smart Assets are virtual representations of both physical and ...
  4. Home Equity

    Home equity is the calculation of a home's current market value ...
  5. Home Office

    A home office is an area in a person's residence reserved for ...
  6. Home Debtor

    A home debtor is an owner of a mortgaged home.
Related Articles
  1. Tech

    How Smart Home Systems Affect Home Values

    Smartphone-operated lighting and blinds, personalized locking systems, intelligent thermostats...do these amenities pay off when it comes time to sell?
  2. Investing

    How Smart Home Technology Can Help You Sell Your Home

    A $1,500 smart home investment could return up to $12,500. Read more to find out what industry professionals are saying about smart homes and why you should invest in smart home technology.
  3. Investing

    Apple Is Building Homes With Connected Devices

    Fancy a new home with automated blinds and a baby monitor machine that triggers a coffee brew process in your kitchen? Apple's got you covered.
  4. Managing Wealth

    5 Smart Devices That Are Transforming Our Homes

    The automated, voice-controlled home of the future is here! These devices put you in greater control of your own home (and its costs) than ever before.
  5. Investing

    Amazon Mulls Offering Home Insurance

    Amazon is mulling an entrance into the home insurance market given its line of smart home devices.
  6. Insights

    Google vs. Amazon in Smart Home Wars (GOOG, AMZN)

    Alphabet is said to have held meetings with home audio manufacturers to convince them to build their own versions of Google Home.
  7. Investing

    Google Home Launches in the UK

    Google's device undercuts the pricing of Amazon's Echo in an important market.
  8. Retirement

    Advisors: 5 Ways Clients Can Use Housing Wealth in Retirement

    Here are five, often overlooked, ways home equity can be used as a source of retirement income.
  9. Investing

    Best Buy Stock Tanks on Amazon Service Team Report

    BBY is under pressure after a report that Amazon will offer its own version of the Geek Squad.
  10. Tech

    How Are Disputes In Smart Contracts Resolved?

    Smart contracts are expected to revolutionize business contracts. But they need to develop mechanisms for dispute resolution first.
Trading Center