WELCOME Houzz Inc.

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1 WELCOME Houzz.com

2 2017 Houzz & Home Data: Renovation Project Trends By Nino Sitchinava, Ph.D. Principal Economist at Houzz September 20, 2017 HIRI Conference

3 Agenda Info.houzz.com/HIRI2017 About Houzz Audience Scope of renovations today Exploring market opportunities: By genera)on By ownership stage By home age

4 About Houzz Audience: Houzz is a one stop shop Project Inspiration Products Professionals 40 million unique monthly users 9 million products 1.5 millions active home professionals

5 Census data show that most of renovation spend today is driven by higher-income households HH Income Breakdown for Homeowners with Projects (2015 AHS, JCHS Tabulations) $40K- $79K 30% $80K - $119K 19% 41% of renovating homeowners in AHS have HH income $80K+ <$40K 29% 22% $120K+ 60% of home improvement expenditure in 2015

6 Houzz audience mostly comprised of higherincome households Surveyed Renovating Homeowners on Houzz (Source: 2017 Houzz & Home) $50K- $74K 13% 7% <$50K 34% 46% $75K - $124K $125K+ 80% of renovating homeowners on Houzz have HH income $75K+

7 Renovation spend of homeowners on Houzz is significantly higher than spend reported by Census Median and Mean Annual Spend of Renovating Homeowners on Houzz (in $1,000s) 2016 Median Renovation Spend ($1000s) $70.0 $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $0.0 $17.0 Median $60.4 Mean Compare to $10K average spend in Census AHS

8 Over 1 in 2 of renovating homeowners on Houzz fall in the age range Share of Renovating Homeowners by Age Ranges AHS vs. Houzz Houzz AHS 22% 25% 24% 32% 27% 16% 17% 17% 10% 9% Under and Over AHS: Census, 2015 American Housing Survey; Tabula)ons by JCHS Houzz: 2017 Houzz & Home Survey

9 Annual Houzz & Home Survey 190K responses worldwide 106K U.S. responses 55K U.S. renovating homeowner responses ed to registered users on Houzz

10 Scope of renovations today

11 Renovating homeowners on Houzz tackled multiple projects in 2016, on par with 2015 Scope of Renovations in 2016 by Renovating Homeowners Interior Rooms #: 2.8 %: 72% Home Systems #: 2.4 %: 62% Exterior Building #: 2.3 %: 57% #: Average number of projects per renovator %: Share of renovators with projects in these areas

12 Projects vary widely, from interior remodels to exterior building upgrades Top Projects in 2016 by Renovating Homeowners Interior Rooms Home Systems Exterior Building Kitchens (31%) Non-master bath (26%) Living room (23%) Master bath (23%) Plumbing (28%) Electrical (25%) Automation (21%) Heating (18%) Paint (21%) Windows (20%) Doors (19%) Roofing (18%)

13 Median renovation spend grew 13% in 2016 vs Median and Mean Annual Spend of Renovating Homeowners on Houzz (in $1,000s) Annual Renovation Spend in $1,000s $70.0 $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $0.0 13% yoy $15.0 $17.0 Median $59.8 Mean $60.4

14 Market Opportunities by Generation

15 Homeowners over 45 have 2X higher median spend than year olds ( Millennials ) Median Annual Spend (in $1,000s) by Age of Homeowner 2016 Median Renovation Spend (In $1000s) $30 $25 $20 $15 $10 $5 $11 $15 $20 $20 $19 $ Age of Homeowner

16 Median spend climbed year over year for many homeowner segments Median Renovation Spend (in $1,000s) $30 $25 $20 $15 $10 $5 10% yoy $10 $11 $15 Median Annual Spend (in $1,000s) by Age of Homeowner $15 11% yoy 11% yoy $20 $20 $18 $18 $ $19 $ Age of Homeowner

17 Certain renovation projects are highly correlated with age of homeowners 2016 Uptake of Select Renovation Projects by Homeowner's Age Share of Renovating Homeowners with Project 50% 46% 45% 40% Outdoor: Lawn Systems: Automation Interior: Living room Exterior: Insulation 35% 30% 30% 28% 27% 25% 20% 15% 16% 17% 10% 11% 5% 0% Age of Homeowner

18 Project-to-owner-age relationship analysis reveals clear patterns of project opportunities by age Uptake by Younger Owners (<35) Uptake by Older Owners (>55+) Projects Very Strong (50%+ Strong (20%-49% Strong (20%-49% Very Strong (50%+ Interior Upgrades System Upgrades Exterior Upgrades Outdoor Upgrades

19 Younger owners have a greater propensity to upgrade non-k&b interior; and trendy systems Uptake by Younger Owners (<35) Uptake by Older Owners (>55+) Projects Very Strong (50%+ Strong (20%-49% Strong (20%-49% Very Strong (50%+ Bedroom (NM) (21%) Living room (28%) Interior Rooms Dining room (19%) Bedroom (M) (19%) Closet (17%) Home Systems Exterior Upgrades Outdoor Upgrades

20 Younger owners have a greater propensity to upgrade non-k&b interior; and trendy systems Uptake by Younger Owners (<35) Uptake by Older Owners (>55+) Projects Very Strong (50%+ Strong (20%-49% Strong (20%-49% Very Strong (50%+ Bedroom (NM) (21%) Living room (28%) Interior Rooms Home Systems Exterior Upgrades Outdoor Upgrades Dining room (19%) Bedroom (M) (19%) Closet (17%) Automation (30%) Electrical (33%) Water heater (17%) Entertainment (17%) Security (16%)

21 Younger owners have a greater propensity to upgrade non-k&b interior; and trendy systems Uptake by Younger Owners (<35) Uptake by Older Owners (>55+) Projects Very Strong (50%+ Strong (20%-49% Strong (20%-49% Very Strong (50%+ Bedroom (NM) (21%) Living room (28%) Interior Rooms Home Systems Exterior Upgrades Outdoor Upgrades Dining room (19%) Bedroom (M) (19%) Closet (17%) Automation (30%) Electrical (33%) Water heater (17%) Entertainment (17%) Security (16%) Insulation (16%) Exterior paint (22%) Roofing (19%) Lawn (46%) Deck (15%)

22 Kitchen, bathrooms & laundry rooms are everyone s priority Projects Interior Rooms Home Systems Exterior Building Upgrades Outdoor Upgrades Weak or No Correlation with Homeowner s Age Kitchen (31%) Bathroom (M) (22%) Bathroom (NM) (25%) Laundry room (14%) Plumbing (32%) Cooling (16%) Heating (18%) Ventilation (12%) Windows (20%) Porch or balcony (12%) Exterior doors (18%) Siding/stucco (7%) Gutters (17%) Beds & borders (50%) Irrigation (16%) Lighting (23%) Shed (13%) Patio or terrace (20%) Driveway (12%) Fence (21%)

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25 Market Opportunities by Homeownership Stage

26 57% renovating homeowners today have lived in their home for 6+ years; 1 in 8 just bought a home 2016 Renovating Homeowners by Length of Stay in the Home 6+ years living in the home 57% 13% 1 in 8 bought a home in 2016 (23% for the first-time) 30% 1-5 years living in the home

27 Median renovation spend of recent repeat home buyers is 2X the spend of recent first-time buyers Median Annual Spend (in $1,000s) by First-Time vs. Repeat Owners Median Annual Renovation Spend in $1,000s $30 $25 $20 $15 $10 $5 $0 <1 yr. in the home yrs. in the home $15 First-time homeowner $30 Repeat homeowners $15 First-time homeowner $20 Repeat homeowners

28 Recent repeat home buyers spend 1.5X-2X more than those living in the home for 16+ years Median Annual Spend (in $1,000s) by First-Time vs. Repeat Owners 2016 Median Renovation Spend (in $1000s) $30 $25 $20 $15 $10 $5 $0 <1 yr. in the home yrs. in the home $15 First-time homeowner $30 Repeat homeowners $15 First-time homeowner $20 Repeat homeowners

29 Repeat homeowners invest the most in the home within the first year of moving in Median Annual Renovation Spend in $1,000s $30 $25 $20 $15 $10 $5 $0 $30 Median Annual Spend (in $1,000s) by Repeat Owner's Length of Stay in the Home $20 $15 $17 $20 $20 <1 year 1-5 years 6-10 years years years 20+ years Length of Stay in Current Home 2016

30 Renovation spend increased yoy for repeat owners at early and late stages of ownership Median Annual Renovation Spend in $1,000s $30 $25 $20 $15 $10 $5 $0 7% $28 $30 Median Annual Spend (in $1,000s) by Repeat Owner's Length of Stay in the Home $20 $20 13% $15 $15 $15 $17 $18 $20 $20 $20 <1 year 1-5 years 6-10 years years years 20+ years Length of Stay in Current Home 11%

31 If deciding to renovate, today s repeat home buyers tend to do whole-house renovations Average Number of Renovation Projects of Repeat Homeowners, by Length of Stay in the Home 4.3 Outdoor projects Average Number of Projects System projects Interior room projects Exterior projects <1 year 1-5 years 6-10 years years years 20+ years Length of Stay in the Home

32 Recent repeat home buyers outperform long-term owners in nearly every interior project type Uptake by Repeat Owners Within 1st Year in the Home Uptake by Repeat Owners ATer 16+ Years in the Home Projects Interior Rooms Home Systems Very Strong (50%+ Strong (20%-49% Living room (31%) Kitchen (38%) Bathroom (M) Bedroom (NM) (22%) (28%) Dining room (25%) Bedroom (M) (24%) Closet (22%) Laundry room (21%) Plumbing (43%) Heating (24%) Electrical (44%) Cooling (22%) Automation (34%) Entertainment (22%) Security (20%) Ventilation (19%) Strong (20%-49% Very Strong (50%+ greater uptake)

33 Outdoor and exterior building features also receive significantly more attention among recent buyers Uptake by Repeat Owners Within 1st Year in the Home Uptake by Repeat Owners ATer 16+ Years in the Home Projects Exterior Building Outdoor Very Strong (50%+ greater uptake) Strong (20%-49% greater uptake) Insulation (18%) Windows (25%) Exterior doors (26%) Gutters (21%) Porch or balcony (14%) Siding/stucco (11%) Fence Lawn (40%) Lighting (31%) Patio or terrace (23%) Irrigation (22%) Shed (14%) Strong (20%-49% Very Strong (50%+ greater uptake)

34 Certain projects are tackled purely on need basis, irrespective of ownership stage Projects Interior Rooms Home Systems Exterior Upgrades Outdoor Upgrades Weak or No Correlation with Repeat Owner s Length of Stay Bathroom (NM) (29%) Water heater (20%) Exterior paint (24%) Roofing (19%) Beds & borders (53%) Deck (15%) Driveway (13%)

35 First-time homeowners follow a U-shaped pattern of median spend on home renovations Median Annual Renovation Spend in $1,000s $30 $25 $20 $15 $10 $5 $0 $15 Median Annual Spend (in $1,000s) by First-Time Owner's Length of Stay in the Home $10 $10 $15 $15 $15 <1 year 1-5 years 6-10 years years years 20+ years Length of Stay in Current Home 2016

36 Current housing market conditions may be shaping the nature of first-time homeownership in new ways Median Annual Renovation Spend in $1,000s $30 $25 $20 $15 $10 $5 $0 $12 $15 Median Annual Spend (in $1,000s) by First-Time Owner's Length of Stay in the Home 25% 25% 25% $10 $10 $10 $9 $15 $15 $15 $15 $12 $12 <1 year 1-5 years 6-10 years years years 20+ years Length of Stay in Current Home

37 First-time homeowners focus extensively on interior comfort-enhancing projects Uptake by First-Time Owners Within 1st Year in the Home Uptake by First-Time Owners ATer 16+ Years in the Home Projects Very Strong (50%+ Strong (20%-49% greater uptake) Strong (20%-49% greater uptake) Very Strong (50%+ Living room (33%) Kitchen (40%) Bedroom (NM) (23%) Bathroom (M) (25%) Interior Rooms Dining room (25%) Bedroom (M) (27%) Closet (23%) Laundry room (17%) Electrical (42%) Plumbing (39%) Water heater (19%) Home Systems Automation (37%) Entertainment (19%) Security (21%) Ventilation (17%)

38 Outdoor and exterior building features are significantly less of a focus in early days of homeownership Uptake by First-Time Owners Within 1st Year in the Home Uptake by First-Time Owners ATer 16+ Years in the Home Projects Very Strong (50%+ greater uptake) Strong (20%-49% Strong (20%-49% greater uptake) Very Strong (50%+ Exterior Building Insulation (18%) Exterior paint (20%) Roofing (21%) Outdoor Lawn (52%) Lighting (31%) Deck (14%)

39 First-time homeowners tackle the exterior building features and outdoor projects on need basis only Projects Interior Rooms Home Systems Exterior Building Upgrades Outdoor Upgrades Weak or No Correlation with First-Time Owner s Length of Stay Bathroom (NM) (25%) Heating (21%) Cooling (16%) Windows (21%) Porch or balcony (10%) Exterior doors (20%) Siding/stucco (8%) Gutters (15%) Beds & borders (45%) Irrigation (14%) Patio or terrace (21%) Shed (13%) Fence (23%) Driveway (11%)

40 Market Opportunities from Older Homes

41 1 in 2 renovated homes were built before 1981 (median home age: 37) Median Age of Owner-Occupied Breakdown of Renovating Homeowners by Home s Year Built Housing (Census) 1995: : : 37 14% 14% 22% 30% 14% 5% Pre Year Ranges When a Home Was Built

42 Highest median spend on homes built during (less than 2,000 sq. ft. homes only) Median Annual Renovation Spend in $1,000s $30 $25 $20 $15 $10 $5 $0 $15 Median Annual Spend (in $1,000s) on Under 2,000 sq. T. Homes, by Year Built $12 $15 $15 $12 $10 $ Age of Homeowner 2016

43 Uptick in median renovation spend for nearly all under 2,000 sq. ft. Median Annual Renovation Spend in $1,000s $30 $25 $20 $15 $10 $5 $0 $12 22% -14% 25% $15 $14 $12 $15 $15 $12 $12 25% $10 $12 $8 $10 $ Age of Homeowner 20% 25% 36% $

44 Older homes significantly more likely to drive replacements of certain systems and exterior features Uptake in Newer Homes (>2000) Uptake in Older Homes (<1981) Projects Very Strong (50%+ greater uptake) Strong (20%-49% Strong (20%-49% Very Strong (50%+ Interior Rooms Home Systems Exterior Building Upgrades Outdoor Upgrades Water heater (18%) Plumbing (35%) Electrical (35%) Heating (20%) Ventilation (13%) Exterior paint (21%) Windows (24%) Exterior doors (22%) Roofing (20%) Gutters (20%) Insulation (18%) Siding/stucco (11%) Fence (22%) Shed (16%)

45 Age of the home is NOT correlated with uptake of interior room remodels and trendy home systems Projects Interior Rooms Home Systems Exterior Upgrades Outdoor Upgrades Weak or No Correlation with Home s Age Kitchen (30%) Dining room (14%) Bathroom (NM) (23%) Bedroom (M) (15%) Living room (21%) Closet (14%) Bathroom (M) (18%) Laundry room (12%) Bedroom (NM) (15%) Dining room (14%) Automation (22%) Entertainment (11%) Cooling (16%) Security (11%) Porch or balcony (9%) Beds & borders (48%) Patio or terrace (19%) Lawn (35%) Irrigation (17%) Lighting (24%) Driveway (11%) Deck (11%)

46 Key Takeaways about Market Opportunities

47 1) Large renovation scope In 2016, renovating homeowners on Houzz tackled, on average: Interior: 2.8 room remodels Systems: 2.4 system upgrades Exterior: 2.3 feature upgrades Outdoor: 3.1 feature upgrades Renovations span all parts of a home; most popular features: Interior: Kitchens and non-master bathrooms Systems: Plumbing & electrical Exterior: Paint & windows Outdoor: Beds, lawn and lighting

48 2) Spend is large & growing Renovating homeowners on Houzz invested: 2016 median total renovation spend: $17K (+13% yoy) 2016 average total renovation spend: $60K 2016 median spend increased yoy for select segments: year olds: $11K (+11% yoy) year olds: $20K (+11% yoy) year olds: $20K (+11% yoy) First-time home buyers: $15K (+25% yoy) Repeat home buyers: $30K (+7%) Long-term owners (16+ yrs): +11%-25% Tight housing inventory, demographic shifts, and aging housing stock likely drivers of spend increases

49 3) Early evidence of demand hot spots Dispropor-onately Popular Projects by Segment Interior Remodels: Kitchens & M. Bathroom Millennials (25-34) Repeat Home Buyers Interior Remodels: Non-K&MB spaces Long-Term Owners Homes Built System Upgrades: Core systems System Upgrades: Trendy tech Exterior Upgrades: Paint & roofing Exterior Upgrades: Windows, doors, siding Outdoor Upgrades: Lawn & ligh)ng Outdoor Upgrades: Structures

50 Learn More About Houzz Research: Project Inspiration Products Professionals 40 million unique monthly users 9 million products 1.5 millions active home professionals

51 Let s Connect! Nino Sitchinava, Ph.D. Principal Economist, Houzz, Inc. Contact info: nino@houzz.com

52 THANK YOU Houzz.com Houzz Inc.

53 Market Opportunities by Generation