Good news for residential landlords: CoreLogic's Renter Applicant Risk Index Report shows that renters had more financial bandwidth to meet their lease obligations in the first quarter.
On a year-over-year basis, the index increased two percentage points in the first quarter, rising to 104 compared to 102 in the first quarter of 2012.
The index measures credit quality and risk of default among renters applying for apartments in multi- and single-family housing units.
When the index score rises above 100, that means applicants are showing improved credit quality and decreased default risk. When it dips below 100, that means applicants have declining credit quality and increased risk of default.
The index indicates that fewer people applied for rentals in the first quarter. Specifically, the number of applications decreased by 5.4% for Class A properties, by 3.7% for Class B properties and by 4.4% for Class C properties, compared to the first quarter of 2012.
It also shows that average annual income was up among the people who applied for rentals. Specifically, the average monthly applicant income for Class A properties was $4,528, an increase of 1.4%. For Class B properties, it was $2,895, an increase of 0.2%, and for Class C properties, it was $2,047, an increase of 0.4%.
In addition, the rent-to-income ratio rose in first quarter. For Class A properties it was 22.9% per lease, a year-over-year increase of 7%. For Class B properties, it was 21.7% per lease, an increase of 11.2%, and for Class C properties it was 21.9% per lease, an increase of 10.1%. CoreLogic noted that the increase in the ratio could be a result of renters stretching their budgets to get into higher-quality facilities.
‘It's encouraging to see better-qualified applicants who are more likely to meet their lease obligations,’ said Jay Harris, senior director of CoreLogic SafeRent. ‘As the economy continues to grow slowly, conditions appear cautiously optimistic for continued improvement in renter applicant qualifications in the year ahead. During this relatively upbeat period, renter trends are pointing toward increased confidence among property owners and applicants.’
Interestingly, the average rent amount for Class A and Class C properties decreased in the first quarter, while the average rent for Class B properties increased slightly. Specifically, the average rent for Class A properties was $1,571, a year-over-year decrease of 0.8%, and the average rent for Class C properties was $554, a decrease of 1.3%. The average rent for Class B properties was $874, an increase of 0.1% compared to the first quarter of 2012.