In the years following the financial crisis, the housing market has been one of the driving forces behind the economic recovery, and that has continued to this day. As growth picks up, business at small- and medium-sized manufacturers and wholesalers could follow suit.
Should this come in the form of big orders, these companies may need to turn to purchase order financing for funding as resources may be limited.
One sign that the housing market is still fueling the economic recovery is the fact that the National Association of Home Builders/First American Improving Markets Index hit an all-time high of 291 in September. The index added 49 metros, and five were dropped from the list.
"The dramatic increase in markets qualifying for the IMI in September was partly due to a recent improvement in the way that Freddie Mac measures home prices, which resulted in stronger gains than previously reported," noted NAHB chief economist David Crowe. "Even so, the broadened list of metros on the IMI continues to demonstrate the slow but steady gains that individual housing markets are making to bolster the national outlook."
New residential construction strong in August
The economy is also receiving a boost from new construction in the single-family home market. According to the U.S. Department of Housing and Urban Development, single-family starts were at a seasonally adjusted rate of 628,000, up 7 percent from the previous month and the fastest pace since February.
Meanwhile, single-family building permits hit 627,000, a 3 percent bump from July and the highest level in more than five years.
"The fact that the trend in single-family starts and permits continues to improve supports our view that construction activity will continue to increase through yea end," Joseph LaVorgna, economist at Deutsche Bank, told ABC News.
Home price appreciation aiding economy
In addition to an increasing number of improving markets, and strong residential construction, rising home prices are also a major part of the housing recovery.
July proved to be another good month with a 12.4 percent year-over-year gain, and a 1.4 percent monthly improvement, according to the CoreLogic Home Price Index report.
"Home prices continue to climb across the nation in July with markets hit hardest during the downturn leading the way," said Anand Nallathambi, president and CEO of CoreLogic. "Nationally, home prices are now within 18 percent of their peak levels reached in April of 2006."
Appreciation isn't expected to slow when August's figures are released, as the Pending HPI projects a 12.3 percent annual jump, and a 0.4 percent month-over-month increase.
"Looking ahead to the second half of the year, price growth is expected to slow as seasonal demand wanes and higher mortgage rates have a marginal impact on home purchase demand," said Dr. Mark Fleming, chief economist at CoreLogic.
Strong housing market could fuel purchase order financing market
With housing continuing to aid the economic recovery, small- and medium-sized manufacturers and wholesalers could begin to see orders from big-box retailers. However, to handle orders of this magnitude, smaller companies often have to rely on some sort of financing.
Initially, businesses may turn to a traditional bank, but due to limited available capital or poor credit, applications may be denied. Fortunately, purchase order financing is available to provide assistance.
This type of lending agreement allows manufacturers and wholesalers to obtain up to 100 percent of the funds needed to complete an order. Perhaps the biggest benefit is that owners of these companies won't have to sell equity to be able to do business with larger businesses.