Credit Risk of Multifamily Renters Decreases Yearly in Q3

As the rental market continues to grow stronger, the quality of rental applicants also showed improvement from last year, according to report from ""CoreLogic"":http://www.corelogic.com/.

[IMAGE]

The data provider's multifamily applicant risk (MAR) index report stood at 106 in Q3 2012, an improvement of two points from last year, but a decrease of 3 points from Q2 2012.

The increase in the MAR index from last year indicates a modest increase in ""national renter credit quality and applicant pool quality,"" the report explained. A score above 100 indicates an applicant pool with reduced average risk of default. The data is based on nearly 6 million apartment home across the U.S.

Out of the four regions, the South posted the greatest yearly increase in Q3, improving 4 points, but the region’s index value was 103, the lowest among the group.

The Northeast registered the greatest value, 113, but was the only one to see its value drop, though the decrease was just by 1 point.

The West improved by 3 points and had the second highest value at 111. The Midwest tied with the South at 103 and posted a yearly gain of 3 points.

[COLUMN_BREAK]

All four regions saw their values fall from Q2, with the Midwest and Northeast seeing a 3 point decrease.

The metropolitan areas that posted the biggest yearly gains were Austin, which rose 5 points to 117, and Washington D.C, which also rose 5 points and increased to 115. Denver gained by 4 points, giving it a value of 109 in Q3.

Rochester’s index value fell the furthest year-over-year. The metro stood below 100 at 99 after dropping by 4 points.

Philadelphia and Boston saw their scores fall 1 point to 114 and 155, respectively.

The report also revealed rent affordability improved, with applicant income increasing 1 percent from Q3 2011. During the same time period, the share of income that went towards rent decreased slightly to 22 percent.

""Lower rent-to-income ratios suggest that applicants can afford higher rents in many markets,"" said Jay Harris, senior director of business development for CoreLogic SafeRent.

Harris also noted a decreased number of single applicants, which indicates ""renters are continuing to share the cost of rent with roommates, family and others in shared-living situations.""

Applicants with little to no credit history (3 or fewer trade lines on file), accounted for 29.2 percent of third-quarter renter applicants. According to CoreLogic, the figure is the highest since 2007, but just a little higher than the Q2 share of 28.9 percent.

""Individuals without conventional credit histories are important component of the market and make up an increasing share of all rental applicants,"" Harris said.

The report also found operators declined the fewest number of applicants so far this year in Q3.