Rising Home Prices Can Lead to More Consumer Spending, Retail Activity

As home prices continue to increase, consumers could find themselves with greater buying power, potentially translating into higher retail sales levels.

Small retailers would welcome additional sales, but business owners also need to be aware of the risk they face with more customers frequenting their stores. With that said, general liability insurance policies are essential for retailers, as a significant amount of customers shopping increases the chances a fall happens that leads to an injury and lawsuit.

CoreLogic’s Home Price Index revealed prices were up 2.6 percent in May when compared to the previous month and 12.2 percent year-over-year. This was the largest annual increase in more than seven years and the 15th straight monthly bump in national prices.

Appreciation is expected to continue into next month as well, with the Pending HPI projecting a 13.2 percent annual gain and 2.9 percent month-to-month improvement.

“It’s been more than seven years since the housing market last experienced the increases that we saw in May, with indications that the summer months will continue to see significant gains,” said Mark Fleming, chief economist for CoreLogic. “As we approach the half-way point of 2013, home prices continue to respond positively to the reductions in home inventory thus far.”

Consumer confidence remains elevated in June
Another factor that could contribute to heightened retail sales activity is high consumer sentiment.

The Thomson Reuters/University of Michigan Index of Consumer Sentiment dipped slightly to 84.1 in June, but this was higher than the preliminary reading earlier in the month.

“Consumers now believe the recovery has achieved an upward momentum that will not be easily reversed,” said Richard Curtin, chief economist at Surveys of Consumers. “To be sure, few consumers expect the economy to post robust gains or think the unemployment rate will drastically shrink during the year ahead.”

The Index of Consumer Expectations and Current Conditions Index remained at elevated levels in June as well, which means Americans are confident in their present and future prospects.

Should these conditions lead to additional activity at small retailers, owners of these businesses would be wise to revisit their small business insurance portfolios, specifically liability insurance.

With more customers in the store, the chances of an incident occurring that leads to an injury increases. If the injury is serious, the customer could even sue. The proper insurance policies can help protect against these claims.