Renters Pose Slightly Higher Credit Risk in Third Quarter, Says CoreLogic

Amid job growth in the current weak economy that's only keeping up with population growth, rental applicant credit quality was down a bit between the second quarter of this year and the third.

Santa Ana, Calif.—Amid job growth in the current weak economy that’s only keeping up with population growth (if that), rental applicant credit quality was down a bit—from 105 to 104—between the second quarter of this year and the third, according to the CoreLogic’s latest Multifamily Applicant Risk (MAR) Index. However, credit quality among rental applicants improved slightly in the third quarter 2011 compared with third quarter 2010, according to the company, from 102 to 104.

The third quarter 2011 national MAR Index includes studios, one-, two-, three- and four-bedroom units. It’s based on CoreLogic’s proprietary SafeRent statistical lease screening model. The model was developed from historical resident lease performance data to specifically evaluate the potential risk of a resident’s future lease performance. The model thus generates scores for each applicant to indicate the relative risk of the applicant not fulfilling lease obligations.

A MAR Index value of 100 means that market conditions are equal to the national mean for the index’s base period of 2004. Greater than 100 indicates market conditions with reduced average risk of default relative to the index’s base period mean, while less than 100 indicates market conditions with increased average risk of default relative to the index’s base period mean. The higher the score, the better, in other words.

The company also compares risk between rental applicants for different sizes of apartments. When comparing applicants for one- versus two-bedroom units, for instance, the MAR Index is slightly higher in the third quarter of 2011 for one-bedroom units at 104, compared with 103 for two-bedroom units.

The report also assesses risk by U.S. metropolitan statistical area, and found that the three MSAs with the leading decreases in the MAR Index were Portland-Vancouver-Beaverton, Ore.-Wash.; San Jose-Sunnyvale-Santa Clara, Calif.; and Jacksonville, Fla., with decreases of three, two and two points, respectively, on a year-over-year basis. By contrast, the three MSAs with the largest increases in the MAR Index were Salt Lake City, Utah; Chicago-Naperville-Joliet, Ill.-Ind.-Wis.; and San Diego-Carlsbad-San Marcos, Calif., with increases of four, five and five points respectively year-over-year.