Orange County builder New Home Co. raised $86 million in its Wall Street debut, as the firm and investors bet on a housing recovery that has shown signs of faltering.
The company priced 7.8 million shares at $11, markedly below their expected range of $15 to $17. The shares opened Friday at $11.50 and hit a high of $12.88 before closing at $12.20.
New Home plans to use the money to buy more land and build more homes.
The initial public offering follows a string of home builder IPOs in 2013, as companies sought to capitalize on the housing rebound. But the market slowed in the second half of the year as mortgage rates rose.
Rising rates and falling builder stocks delayed plans for an offering last summer, said Tom Redwitz, New Home's chief operating officer and a co-founder. Home sales have been weak recently, raising questions about the underlying strength of the rebound. In December, signed contracts for previously owned homes fell nationally to their lowest level since 2011. New-home sales also declined from the previous month.
Despite that "bumpy" economic landscape, Redwitz said New Home is optimistic about the recovery's future — especially in the new-home market. For years, builders sat on the sidelines and still haven't boosted construction to historic norms. That has helped create a shortage of homes for sale and will provide an underpinning for future improvement, Redwitz said.
"We think the future looks bright," he said.
Although sales of previously owned homes in Southern California fell in December compared with the same month a year earlier, new-home sales did rise, according to research firm DataQuick. That was largely because of strong sales in upscale Orange County.
New Home, founded in 2009, has a presence in Southern California, the San Francisco Bay Area and the Sacramento metro region. Its Lambert Ranch community in Irvine has sold out.
Among its co-founders is Chief Executive Larry Webb, who formerly ran the now-defunct John Laing Homes.
Through the end of September, New Home has delivered 579 homes at its communities, through unconsolidated joint ventures and as a contractor, filings show. It owns or controls thousands of lots through those operations.
New Home is trading on the New York Stock Exchange under the ticker NWHM.