Report: Credit Quality Improves for Prospective Renters in Q1

The credit quality for potential renters has improved over the last year, according to ""CoreLogic's"":http://www.corelogic.com/ Renter Applicant Risk (RAR) index report.

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In the first quarter of this year, the index increased to 104 compared to 102 a year ago and 99 in 2011. A value above 100 suggests improved credit quality among renter applicants and a decreased risk for lease default.

""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.""

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On a regional basis, the index found prospective renters in the Northeast averaged a value of 111, making them the least risky group. The West recorded an index value of 110 after improving by three points from 2012.

Meanwhile, the Midwest and the South sat below the national average at 100 and 101, respectively.

The report also highlighted renter trends among three different property types based on price range: Class A (rents greater than $1,100), Class B (rents between $750 and $1,100), and Class C (rents less than $750).

Among all categories, renter traffic decreased. Class A properties saw traffic slow the most with a 5.4 percent decrease over the last year.

Renter applicant income edged up slightly across all property classes, with income rising 1 percent for Class A applicants, the most out of any other category.

While incomes rose, the average cost of rent fell for Class A and Class C properties, falling 0.8 and 1.3 percent, respectively.

Although income rose, rent-to-income ratios were up for all property classes. For Class A properties, the rent-to-income ratio was 22.9 percent, up 7 percent. Class B properties saw the biggest jump, rising 11.2 percent to an average ratio of 21.7 percent.

""Rising rent-to-income ratios could indicate that individuals are stretching their budgets to afford higher quality properties,"" the report stated.