Renter Credit Quality Improves in 2nd Quarter as Least Qualified Renters Exit Market

3 min read

By Anuradha Kher, Online News EditorRockville, Md.–The overall national renter credit quality has considerably improved compared to the first quarter of 2009, according to the second quarter Multifamily Applicant Risk Index (MAR Index) recently released by First Advantage SafeRent. The MAR Index is also up 1 point from the second quarter 2008 value of 105, […]

By Anuradha Kher, Online News EditorRockville, Md.–The overall national renter credit quality has considerably improved compared to the first quarter of 2009, according to the second quarter Multifamily Applicant Risk Index (MAR Index) recently released by First Advantage SafeRent. The MAR Index is also up 1 point from the second quarter 2008 value of 105, indicating a better applicant pool compared to one year ago.“This is the most significant time of the year for Class A properties, and the period until September-October is the time to capture the best applicants,” Jay Harris, VP of Business Services at First Advantage SafeRent, tells MHN.The second quarter national MAR Index, including studios, one-, two-, three- and four-bedroom units (BR), was 106, a 6 point increase in overall national renter credit quality over the first quarter of 2009. This confirms a trend of seeing higher MAR Index values during the traditionally high applicant traffic volume periods of the second and third quarters. When comparing applicants for one- versus two-bedroom units, the MAR Index is slightly higher for one-bedroom units at 107 compared to 106 for two-bedroom units in the second quarter (see Graph 1).“The index is actually higher this quarter than it was in 2007, which was a better year for the rental market. This is because people are doubling up and getting co-signers, and because the least qualified renters have left the market due to job losses. So the ones that remain in the market are a smaller set but a better qualified one.”The Multifamily Applicant Risk Index (MAR Index) is based on traffic credit quality scores from First Advantage SafeRent’s statistical screening model and is updated quarterly to provide property owners and managers with a benchmark against which to compare their portfolios’ performance. The comparison indicates whether the portfolio is performing above, below or at market levels with respect to attracting and securing applicants with higher credit quality and an increased likelihood of fulfilling their lease.Regionally, the Northeast continues to have the highest MAR Index with a value of 116 and the South has the lowest MAR Index with a value of 102 (see Table 1). From a Metropolitan Statistical Area (MSA) perspective, the three MSAs with the leading decreases in the MAR Index were Charlotte-Gastonia-Rock Hill, NC-SC; Minneapolis-St. Paul, MN-WI; and Portland-Salem, OR-WA with decreases of 4 points. The three MSAs with the leading increases in the MAR Index were Nashville, TN; Raleigh-Durham-Chapel Hill, NC; and San Antonio, TX with increases of 3, 3, and 4 points, respectively (see Table 2). Harris says the index will remain stable during the rest of the year with volume dropping off. In the fourth quarter of 2009 and first quarter of 2010 the MAR index is expected to be between 98 and 100.An MAR Index value of 100 indicates that market conditions are equal to the national mean for the index’s base period of 2004. A value greater than 100 indicates market conditions with reduced average risk of default relative to the index’s base period mean while less than 100 points to market conditions with increased average risk of default relative to the index’s base period mean.(All images courtesy Advantage SafeRent)

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