IRVINE, CA-The decrease in default risk among renter applicants year-over-year, on which GlobeSt.com reported earlier today, has positive implications about the financial stability of the renter market and the economy as a whole. Jay Harris, senior director of CoreLogic SafeRent, which recently released its fourth-quarter renter-applicant risk-index report, tells GlobeSt.com that the numbers indicate that income is continuing to rise, which means that people are able to afford higher rents.
“The quality of applicants is continuing to increase, and the fourth quarter reflects the trend of what we’ve been seeing for the past two years,” says Harris. “Applicants have a better ability to pay rent and are less likely to skip out owing money.”
One factor driving the decreased default risk is that with fewer unemployed renters, more applicants are now able to double up their incomes and put them toward rent, Harris adds. “We saw that in all classes of properties across the country—A, B and C. Also, we say that the individual income per applicant is going up.”
The conclusion that SafeRent has come to is that the rental market will continue to see well-qualified applicants showing up to rent apartments—with one caveat. “The big trick will be in the spring as we see home prices coming back up,” cautions Harris. “Mortgage rates are still relatively low, although they may be headed up a little bit. Will we see some apartment renters start to move out to buy a home or condo, or will they continue to stay and rent in large numbers?”
He adds that applicants’ inability to pay their mortgage doesn’t seem to be reflecting badly on their renter applications. “Scores are very strong, and people are coming out in good numbers to rent. We don’t see the bad mortgage hangover of a couple of years ago hindering applicants’ ability to rent on our index.”
Another trend is that fewer applicants are being declined, which speaks to operators being able to take on higher-risk tenants. “Apartment operators are able to adjust their criteria to take on slightly more credit risk and qualify more applicants,” says Harris. “That’s a pro-consumer message. In our experience, property operators are moving toward new models for qualifying tenant risk and are able to qualify some people they couldn’t in the past.”
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