Good News for Rental Markets as Prices, Renter Credit Quality Both Rise

Landlords will be happy with arnreport published by TransUnion, the credit reporting company.  It says that, not only have rents risen inrneach of four classifications of rental properties it analyzed, but so has thernrisk profile of applicants to rent those properties.  The latest TransUnion Rental Screening Solutions industry report found thatrnaverage rental prices have increased nearly 4% nationwide and the credit riskrnof applicants for those properties as measured by TransUnion’s Resident Scoring Model has steadily improved, with anrnaverage improvement of 1% in the last year.</p

In conducting the study TransUnionrncollected data from property managers for the same properties in September 2012rnand September 2013.  The company dividedrnrental properties into four levels; Level A (newer, institutional properties),rnLevel B (older, institutional), Level C (older, less desirable area) and LevelrnD (older, less desirable area, renovations/updating needed).  In 1912 the respective rents ranged from $665rnfor Level D to $1,198 for Level A with the average across property types at $1,034.</p

By 2013 all four levels experienced rentalrnincreases with the average rising to $1,072. rnThe largest percentage increase was for Level D at 4.2 percent (to $693)rnand the smallest, at 2.1 percent was Level C, from $843 to $860.  Levels A and B each saw increases of 3.8rnpercent with the 2013 price for Level A averaging $1,244 and Level B risingrnfrom $1,008 to $1,047.</p

TransUnion found that the creditrnrisk of residents also improved across the board with average increases inrncredit worthiness at Levels C and D up to double the improvements noted for thernmost expensive properties.  Level A wasrnup 0.9%; Level B, 0.3%; Level C — up 1.3% and Level D — up 1.7%.   The company offered no explanation for thernincreases.</p

“The rental market continues tornbe strong as demand for rental units remains high while consumer credit riskrnslowly improves,” said Michael Doherty, senior vice president of TransUnion’srnrental screening solutions group. “The combination of improving rentalrnrisk scores and continued demand for rental properties is particularly goodrnnews for property managers.”</p

“As property managers determinernthe criteria for what types of residents they want for their properties, it isrnvaluable to have a basic understanding about the risk level of the rentalrnpopulation,” he continued.  “Whenrnthe credit risk of the population improves, property managers may be morerninclined to tighten their criteria to ensure they are getting the best possiblernresident. This is integral because a resident who ‘skips’ out on a lease canrncost a property manager thousands of dollars in lost revenues.”</p

TransUnion noted that the rentrnincreases and the improvements in credit risk was not a regional phenomenon; itrnwas apparent in most markets.  Forrnexample in Los Angeles average rental costs rose 3.2% from $1,565 torn$1,615 while credit risk improved 1.1%. rnIn New York rents were up an average of 5.5 percent and credit risk byrn0.4 percent, and in Chicago average rental costs increased nearly 5% fromrn$1,345 to $1,411 while credit risk remained the same.

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