How Clear Choice Homes changed the way Americans buy homes

Written by By Saleha Mohsin, CNN Founded in 1986 as a loan lender, Clear Choice Homes has turned into one of the largest home improvement and solar co-op companies in the country. Since becoming…

How Clear Choice Homes changed the way Americans buy homes

Written by By Saleha Mohsin, CNN

Founded in 1986 as a loan lender, Clear Choice Homes has turned into one of the largest home improvement and solar co-op companies in the country. Since becoming a manufacturer and distributor of home upgrades in 1999, Clear Choice has expanded its impact well beyond just the home improvement industry. The name of the company signifies a “clean, bright, efficient home,” and the company prides itself on satisfying this need.

With its middle-market pricing, Clear Choice aims to give customers the ‘best and brightest’ home upgrades and materials available. In a 2013 Forbes article , Joe Gaudetta , the founder and chief executive officer, gave a simple definition of Clear Choice: “to give great products at a great price.”

Today, the company operates in 20 states and with over 400 employees, it continues to expand in order to meet the rising demand. In May, the company moved its headquarters from New Jersey to the Bay Area.

But even in its expansion and effective branding, something has become clear to Gaudetta. Over the past 25 years, he notes, there have been significant shifts in the way people want to buy and live in homes.

“The average savings they’re looking for are seven to 12 percent over what today’s average new home is going to cost.”

But why are homeownership costs so high today?

“On the surface, it’s difficult to understand — it’s because of the astronomical cost of land. Land prices have escalated significantly over the last 40 to 50 years. Take a look at that chart from the Federal Reserve which shows how land prices have escalated by 700 percent since 1980. You can see land is one of the single largest expenses for homebuilders and therefore their cost of construction. That’s the biggest expense today.”

But what seems like a mystery can be explained by market forces and projections.

“Land prices have always gone up with inflation,” he continues. “But the economist, Steve Keen, estimates that land prices will go up another 250 percent between now and the end of the decade.”

At the same time, the number of new units being built in North America is low. Gaudetta notes that since the 1980s, new home starts have dropped by 40 percent.

“So you have this: it’s all the factors: the supply, the demand, and the expectation of what the price of that new product will be. And right now, the price of new construction has been consistently moving higher.

“Obviously that’s not reflective of the actual wage growth, which has not kept up with the cost of new construction. It’s been pretty consistent and that’s the reason why you have this exponential rise in the price of construction.”

The challenge for homebuilders is not only to remain competitive with other homebuilders, but also to maximize revenues — not in just new homes, but across properties.

“You have to have all of the assets in house — whether you’re building a new home or upgrading your existing home — you have to manage these assets well because it’s very competitive right now. You can choose to do the upgrade very inexpensively from a builder, and to get a new house to market, you’re going to have to put something competitive on the market and then get the market bidding on that new house.”

It is this creative and competitive approach that Gaudetta says he hopes to provide for Clear Choice as well.

“What we want to do at Clear Choice is to try to provide a customer who will pay for the product and for the maintenance of that product, and also the value that that customer is going to be getting. So they’re buying quality, they’re buying convenience, they’re paying a significant discount over what the going rate is. And ultimately, they can do it for less money.”

A matter of the customer

While maintaining the value of a product may be the company’s goal, Gaudetta says the company’s primary focus remains on its customers. Clear Choice customers are, after all, only “the best and brightest” so when deciding on improvements, they are looking for things like tasteful upgrades, the benefits of a solar panel system and sustainable materials, and consistent satisfaction from the company.

“So we think about who our customer is — what they want from the product — and then really develop that plan around that. By the way, those plans are living up to our expectation with everyone we’ve been able to get to so far.”

If Clear Choice was marketing itself to just average consumers, Gaudetta says, it “wouldn’t work.”

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