Prospective apartment renters nationwide are having an easier time meeting their lease obligations and avoiding default in the first quarter, according to CoreLogic’s renter applicant risk index report.
Overall, the index showed a two-point year-over-year increase to a value of 104. The Irvine, Calif.-based analytic firm’s index is based on an analysis of 31,000 properties representing apartment homes and single-family rentals across the country.
An index value above 100 indicates improved applicant credit quality and decreased lease default risk among
Among the four regions in the U.S., the Midwest posted the lowest RAR index value in 1Q13 with a score of 100, reflecting the lowest applicant credit quality. However, this value is still two points higher than a year ago.
Both the South and West experienced three point gains in their RAR scores for the first quarter of 2013 from the same time period last year, with scores of 101 and 110, respectively. Meanwhile, the Northeast remained flat from the previous year by posting a value of 111.
“It’s encouraging to see better qualified applicants who are more likely 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.”
In the first quarter of 2013, CoreLogic said applicants’ incomes rose slightly across all property classes. On a yearly basis, the average monthly applicant income for Class A properties was $4,528, a 1.4% increase. For Class B properties, incomes were up 0.2% to $2,895, while Class C properties were $2,047, a 0.4% rise.
Additionally, rent-to-income ratios increased too for the quarter compared to the first three months of 2012. For Class A properties, rent-to-income was 22.9% per lease, up 7% on an annual basis. CoreLogic said the average rent-to-income ratio was 21.7% per lease for Class B properties, a yearly increase of 11.2%. Lastly, Class C assets had a rent-to-income ratio of 21.9% per lease, a year-over-year uptick of 10.1%.
“Rising rent-to-income ratios could indicate that individuals are stretching their budgets to afford higher quality properties,” CoreLogic said.
However, the average rent amount for Class A properties fell in the first quarter to $1,571, an annual drop of 0.8%. At the same time, Class C properties rentals decreased by 1.3% to $554.
Only Class B assets experienced a slight rise, increasing 0.1% to $874.
