Strong home value appreciation could fuel inventory financing market

The past couple of months have been poor for U.S. consumers, but with strong home value appreciation in August, spending could pick up in the near future as household wealth improves. 

When sales rise, small- and medium-sized retailers will run into the need to replenish the stock room, but this can be difficult to complete on their own dime. Fortunately, inventory financing is available to provide assistance. 

Nationally, home values were up 0.4 percent in August when compared to the previous month, and 6.6 percent year-over-year, according to the Zillow Real Estate Market Reports. This was the largest annual gain in more than seven years. 

"August marked the end of one of the hottest summer home shopping seasons in years, as home value appreciation rates continued their rocket ride upward – perhaps dangerously so in some metro areas," said Zillow chief economist Stan Humphries.

In the next year, appreciation is expected to remain strong, with a 5.2 percent jump for the 12-month period ending August 2014. 

Strong appreciation could boost confidence
Americans need something to improve their faith in the economy, as the Bloomberg Consumer Comfort Index dropped to the lowest level in one year during the week ending September 15. 

"The decline in overall confidence is the result of a slowdown in the economy," said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. "This reflects rising rates and a deceleration in sensitive sectors like residential investment and home purchases."

However, with strong home value appreciation, consumers could begin to feel better about the economy, and even spend more money in the coming months. 

Inventory financing market could receive a boost
Should higher home values lead to increased spending levels, small- and medium sized retailers may find that they are unable to restock their shelves. This can be a problem, as sales may fall without product available to sell. 

Initially, these businesses may turn to a traditional bank for a loan, but due to limited available capital or poor credit, among other reasons, they may be turned down. If that is the case, inventory financing could be utilized. This form of asset-based lending enables retailers to use current product as collateral to obtain a revolving line of credit, which, in turn, can be drawn from to purchase inventory and keep shelves full.