Hull found themselves 3-0 up within 33 minutes and, while McDermott took some positives from his side battling back to 3-2, he was disappointed at conceding so readily at home.
The result was Birmingham's fourth home league defeat so far this season, and McDermott acknowledged that such a record is not good enough.
"We are all devastated. The only thing to be pleased about was showing some character to come back with two goals. To go three goals down a lot of teams would have thrown in the towel but they kept going," said McDermott.
"We gave it go but to concede three goals at home is not acceptable. We are all devastated. If you don't win your home games you are not going to be in the playoffs. We know what is wrong and we will put it right.
"You should not have to score four goals at home to win. But while we collapsed against Barnsley but I thought against Hull we could have got back into the game. The players were told before the game of the danger Hull could create. Lee Clark gave them a lengthy talk and showed them videos."
The result leaves Birmingham struggling in 19th in the Championship table.