Consumers continued to get a boost from home prices, as they posted the largest annual increase in more than seven years in May. With more equity in their homes, consumers could begin to spend more money, which may increase the need for retail inventory financing.
CoreLogic's April Home Price Index report revealed a 12.1 percent year-over-year increase, and 3.2 percent bump from the previous month. This was the largest annual gain since February 2006 and the 14th straight month of year-over-year improvement.
Looking forward, the firm's Pending HPI projects prices will rise 12.5 percent from a year earlier in May, and 2.7 percent from April, further aiding the personal financial situations of homeowners.
"The pace of the housing market recovery quickened in April as home prices rose across the U.S.," said Anand Nallathambi, president and CEO of CoreLogic. "For the second consecutive month, all 50 states registered year-over-year home price gains excluding sales of distressed homes."
Should rising home prices lead to more consumer spending, U.S. small- to medium-sized retailers could receive a much needed boost. Sales have been sluggish for much of the year despite a slight increase in April, according to the U.S. Department of Commerce.
In addition to higher sales, smaller retailers may need to increasingly rely on inventory financing if consumer spending picks up. With product coming off the shelves, these companies will need to replenish inventory, but many small businesses can't do this on their own.
That being said, retail inventory financing could be utilized, as this form of asset-based lending allows a business to use current inventory as collateral to obtain a revolving line of credit. This line of credit can than be used to purchase additional inventory to keep shelves stocked.