THE CONSTANT QUEST…

John Fenn, Division President Inland Empire

© 2016 KB Home 2

Inland Empire Management Team

© 2016 KB Home 3

Our Quest: 60th Anniversary for KB Home

Constant improvement of Satisfaction, internal and external

Constant improvement of the quality of our homes

Constant improvement on cycle time

Market leader on all fronts

Stay current with the latest in technology and trends

Quest to be the best

© 2016 KB Home 4

Regional Overview

Source: U.S. Census Bureau, Bureau of Labor Statistics, RiversideTopTenEmployers.com

Inland Empire Area Coverage:

Riverside County - 28 cities

San Bernardino County – 24 cities

East San Gabriel Valley / LA County – 10 cities

Population: 5.35 million

Area: 5,062 sq. miles (sized to the state of Connecticut)

Employment: 2.13 million

Permits: SFD 8,978 (KB: 10%) MF 3,482

Top Employers (# of employees):

Amazon, QVC, Distribution Hub, U.C. Riverside, Riverside USD, City of Riverside, Pac Bell/AT&T, Kaiser Permanente, Jurupa USD, The Press Enterprise Co., HUB Int’l Insurance Svcs., Alvord USD, Riverside Community Hospital, Ports of Int’l Goods/Trades, Loma Linda Medical, etc.

East San

Gabriel Valley

Riverside County

San Bernardino

County

© 2016 KB Home 5

Regional Overview: Active Communities

Wildflower at Las Haciendas

La VentanaCalabria

Spring Mountain Ranch:

Presidio, Mountain Gate

The Lodge:

Harmony / Elation / Symmetry

Park Place:

Hadleigh / Margate

Lynbrook

Stonecrest

CabrilloTerraces

Silvercreek

Mahogany Hills:

Acacia, Hawthorne, Ironwood

Pinnacle

Seneca

KB Home – Inland Empire Division

Target: 1st Time & 1st Move-Up Buyers

20 Active Communities

13 Detached Traditional

7 Detached Small Lot / Alley Load

Price Ranges: $230,000 to $889,000

Sq. Ft. range: 1,430 to 4,506

YoY Net Sales Growth: +30%

© 2016 KB Home 6

Regional Overview: Buyer Profile

Source: KB Home / MarketSight

Buyer Experience

41% 1st Time Buyer

59% Experienced Buyer

Age

30% Under 34 years old

49% 35 to 54 years old

21% 55+ years old

Income

23% earn below $80k

39% earn $80k - $120k

38% earn over $120k

Household Composition

62% couple with kids

11% single with kids

13% couple without kids

13% single without kids

Education Level

24% advanced degree

36% college degree

12% high school graduate

25% some college

© 2016 KB Home 7

Growth: Quest to be the Largest Builder in the IE Market!

Currently #3 in the Inland Empire market (based on unit closings)

How do we grow New Communities

Open On Time & On Budget

Execute on our land strategy

© 2016 KB Home 8

Growth Strategy

KB Home Inland Empire – 2016/2017

A look ahead - 5 New Communities

Beaumont

Chino Hills

Fontana

Menifee

Upland

Infill in the East San Gabriel Valley

Focus on Single Family traditional detached in the San Bernardino and Riverside Counties

Selective use of attached products in “A” markets of the Inland Empire

© 2016 KB Home 9

Growth Strategy: 3 Year Forecast

0

200

400

600

800

1000

1200

1400

2015 2016 Projected 2017 Projected 2018 Projected

34%

26%

26%

© 2016 KB Home 10

Product: Build a Better Home…Quest to be the BEST!

Challenge ourselves daily to improve our homes Quality (Fit & Finish Performance)

Sustainability Reduce waste

Green product use

Stay affordable Control cost (Labor & Products)

Be the best value in each market

Listen to our surveys and match consumer demand & desires

Innovative plans & products that are efficient to build

© 2016 KB Home 11

Spotlight Project: Master Plan Community

Spring Mountain Ranch: Mission Gate, Presidio Point

Riverside, CA

• $376,990 - $469,990

• 1698 - 3379 Sq. Ft

• 3 - 6 Beds

• Nine Different Plan Types

• 435 Units

• Sports Courts

• Pedestrian Trails

© 2016 KB Home 12

Spotlight Project: Master Plan Community

Mahogany Hills: Acacia, Hawthorne, Ironwood

French Valley, CA

• $359,990 - $447,990

• 1698 - 4506 Sq. Ft

• 3 - 6 Beds

• Single and Two Story Plans

• 503 Units

• Baseball Park

• Country Setting

© 2016 KB Home 13

Spotlight Project – Large Lots

La Ventana

Rancho Cucamonga, CA

• $764,990 - $888,880

• 2491 - 4506 Sq. Ft

• 3 - 6 Beds

• Casita option

• 1/2 Acre lot size

• Equestrian / Walking Trails

© 2016 KB Home 14

Spotlight Project: Attached Product

Jade Tree

Chino Hills, CA

• Starting in the mid $500’s

• 1630 - 1735 Sq. Ft

• 3 - 4 Beds

• Up to 3.5 Baths

• 65 Townhomes

• Three Story Units

• Community Park

• Greenbelts

• Opening Q1, 2017

© 2016 KB Home 15

Market & Economics: Inland Empire New Homes

Source: Metrostudy

Starts Up 6%

Closings Up 22%

+66%+1%

+22% +4%

• Median new home price: $417,500 2Q 2016, up 4.2% from last year.

• Annual new home starts: 7,698 through 2Q 2016, up 4% from a year ago.

• Annual new home closings: 7,705 through 2Q 2016, up 22% from a year ago.

© 2016 KB Home 16

Market & Economics: New Home Detail Q2 ‘15 – Q2’ 16)

Source: Metrostudy

Riverside County 2Q 2015 2Q 2016

AnnClosings 3,605 4,408

AnnStarts 4,073 4,426

HousInv Supply 9.3 mos. 7.7 mos.

VDL Supply 23.4 mos. 22.3 mos.

San Bernardino County 2Q 2015 2Q 2016

AnnClosings 1,700 2,485

AnnStarts 2,339 2,633

HousInv Supply 10.5 mos. 7.9 mos.

VDL Supply 31.4 mos. 21.2 mos.

Coachella Valley 2Q 2015 2Q 2016

AnnClosings 999 812

AnnStarts 982 639

HousInv Supply 10.1 mos. 9.8 mos.

VDL Supply 42.6 mos. 71.0 mos.

© 2016 KB Home 17

Market & Economics: Home Price Appreciation

MEDIAN ANNUAL HOME PRICE

2nd Quarter 2016

$1

33

,97

0

$1

37

,52

4

$1

38

,75

6

$1

36

,40

3

$1

31

,54

5

$1

23

,11

6

$1

17

,03

8

$1

17

,18

8

$1

18

,68

5

$1

27

,13

3

$1

37

,34

9

$1

53

,02

3

$1

74

,68

6

$2

13

,67

3

$2

89

,98

4

$3

57

,32

3

$383,802

$3

56

,89

8

$2

33

,16

3

$1

57

,99

1

$1

74

,30

5

$1

68

,35

7

$1

83

,88

1

$2

33

,12

7

$2

63

,48

2

$280,821

$2

94

,22

4

$3

02

,20

3

$3

08

,09

0

$3

11

,25

2

$3

11

,86

9

$3

08

,86

6

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

est2

01

7p

rj2

01

8p

rj2

01

9p

rj2

02

0p

rj2

02

1p

rj

Source: Moody's Analytics; various county recorders offices; Real Estate Economics

FORECAST PRICE APPRECIATION

Riverside-San Bernardino-Ontario, CA CBSA

Category 2015 2016 2017 2018 2019 2020

All Homes 6.6% 4.8% 2.7% 1.9% 1.0% -1.0%

New Home 3.7% 3.8% 1.8% 1.5% 0.7% -0.7%

Existing Homes 3.0% 3.3% 1.5% 1.3% 0.6% -0.6%

Distressed Homes 5.2% 3.4% 2.1% 1.4% 0.8% -0.7%

Source: Real Estate Economics

© 2016 KB Home 18

Market & Economics: Strong Job Growth

Source: Bureau of Labor Statistics; Real Estate Economics

1,200

87,200

98,100

336,700

11,400

43,400

143,300

208,300

156,900

44,700

240,600

0 100,000 200,000 300,000 400,000

Natural Resources and Mining

Construction

Manufacturing

Trade, Transportation, and Utilities

Information

Financial Activities

Professional and Business Services

Educational and Health Services

Leisure and Hospitality

Other Services

Government

-100

6,900

3,700

14,100

100

500

0

6,100

6,800

1,400

7,300

-2,000 2,000 6,000 10,000 14,000

Natural Resources and Mining

Construction

Manufacturing

Trade, Transportation, and Utilities

Information

Financial Activities

Professional and Business Services

Educational and Health Services

Leisure and Hospitality

Other Services

Government

Total Employment by Super Sector MSA 12-Month Employment Change by Super Sector

• Total non-farm jobs has increased by over 58,000 year-over-year

• Since 2010, the Inland Empire has added over 248,000 jobs

• Unemployment is down to 6.5%, compared to 13.7% in 2010

© 2016 KB Home 19

KB Cares

• Riverside University Health System Foundation golf

tournament

• 2016: $1 million commitment started in 2007

© 2016 KB Home 20

Design Center Studios

Rancho Cucamonga - Opened 2014 Temecula - Opened 2015

Conveniently located within high traffic shopping centers, go to destinations for food, entertainment, and shopping.

© 2016 KB Home 21

Customer Satisfaction Index (CSI): Quest to be #1

Customers are surveyed 30 days and 11 months after close of escrow

Our current 30 day CSI is 95.4%

Our Goals 97% overall satisfaction

Deliver 100% of homes Complete

Deliver 100% of homes On Time

The house must perform, no warranty claims within the first 30 days

Survey questions tie directly to the performance of our partners

11 months after COE, customers are surveyed on product performance, quality, workmanship, and materials Interior walls, Interior paint, Carpeting and flooring, Kitchen appliances, Heating and air-

conditioning system, Lighting fixtures, Windows, Cabinetry and finish, Overall Satisfaction with Quality of Workmanship and Materials

© 2016 KB Home 22

Customer Satisfaction Index (CSI): Your Survey Questions

Satisfaction with the variety of options and upgrades offered

How well job site cleanliness was ensured around your home

Was the home delivered on the date originally promised?

Was the home 100% complete when delivered?

Condition of home at walk-through/orientation,

Overall condition of the home at move-in

Accuracy of home completion date originally given to you

Overall Satisfaction with Home Readiness

How quickly did KB Home RESOLVE your warranty service issues

How many visits on average did it take to resolve each of your warranty service requests?

Quality of repairs / service provided (i.e., fixed right the first time)

Left your home clean after service work

Overall Satisfaction with Price and Value

Overall Satisfaction with Quality of Workmanship and Materials

Overall Satisfaction with the quality of your home

KB Home met its commitments to you

© 2016 KB Home 23

Our Partners: Quest to be your Best Customer!

It is our goal to be your #1 customer

True partnership

Collaborative relationship

Quick pay

Improved communication on schedules, work flow planning, and trends

© 2016 KB Home 24

Our Partners: Ways to be better partners with KB Home CSI is our top priority

Need to be aligned with our top priorities

CSI

Cost control

Produce a better product

Product must be available & must perform

Workforce must be able to supply our needs without delays

Know and understand our quality expectations

PMT on current and new product roll-outs for purchasing and studio teams

National level suppliers

Monthly division contact to address any escalated issues

Advanced notification for product changes; additions and deletions

Price stability

Regional suppliers

Trade partner owners and senior management involvement in job site QC walks

Employee training; set right expectations with employees on quality, safety , scheduling and KB Home procedures

Workload forecasting

Review “All Lot Details” on KBTPO for additional information that may effect your work

Job site cleanliness

Be better today than you were yesterday…The Constant Quest!