Rental prices increased marginally in August -- traditionally one of the year's busiest rental months -- compared to the same period in 2011, according to a new TransUnion analysis on rental market trends. Average rental prices for the nation increased 1.1% from $876 to $886. However, rental prices increased most in Level C (2.6%) and Level D (7.3%) units, apartments often associated with those found in college towns.
While rental prices increased, security deposits declined between August 2011 and August 2012. TransUnion found that the average amounts landlords accepted for deposits at lease signing dropped from $319 to $301.* Interestingly, Level D units saw an increase from $297 to $333.
For the purposes of this analysis and to ensure the validity of the information, national data on rental applications was collected from property managers utilizing TransUnion's tenant screening solutions in both August 2011 and August 2012.**
"August is generally one of the busiest months of the year in the rental market, driven primarily by students returning to their respective colleges and universities," said Steve Roe, vice president in TransUnion's rental screening business unit. "Typically college rental properties are in old, established neighborhoods, surrounding the campus (C and D level units). These two property types experienced the greatest year-over-year percentage increases in their rental prices. As the economy slowly started to improve this past year, and the demand for rental properties remained strong, it was not unusual to see rental prices rise. Interestingly, C and D level rental units made up a larger share of total units observed this past August, which also may be a driver of their rental price increases."
Rental price changes were noted among the four primary levels of rental properties, including: Level A (newer, institutional properties), Level B (older, institutional), Level C (older, less desirable area) and Level D (older, less desirable area, renovations/updating needed).
In addition to experiencing the largest price increases, more property managers of Level C and D rental units tightened their criteria for potential applications without any conditions such as a higher deposit amount. "While a great majority of property managers do not change their acceptance criteria very often, there is value in looking at the direction of this indicator," said Roe. "When property managers do begin to loosen the criteria, it's likely you also will see lower rental prices."
Based on a proprietary decisioning algorithm where property managers may determine the weight of certain selection variables, TransUnion's analysis found that Level C property managers that made changes to these measures, tightened their acceptance criteria by 1.7%. Level D property managers tightened their criteria by 1.0%, followed by Level A (0.5%) and Level B (0.4%).
"Whether you are renting a premium apartment to an attorney or a room to a college student, it's important for property managers to find trustworthy tenants," said Roe. "Property managers have lost thousands of dollars when residents turned out to be unreliable, and this will continue to happen if they do not conduct a proper tenant screening."
Property managers have the ability to conduct due diligence during the tenant screening process by using services such as TransUnion CreditRetriever
for large property management companies and TransUnion SmartMove"
for independent landlords.
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