Marin County apartment sales surge while rents and prices decline in 2024

Marin County apartment sales volume last year increased 2.5 times, from $62 million in 2023 to over $221 million in 2024. Investors waiting for lower prices and higher returns finally found them last year.

With higher mortgage rates and stricter lender underwriting, deals became creative with seller financing and first and secondary financing occurring in more than half the closed sales.

As prices softened, capitalization rates increased year over year from a median of 4.63% in 2023 and moved to 5.15% in 2024. Commonly called the cap rate, it is a crucial measurement in commercial real estate of investment risk, return potential and property value efficiency, or how effectively a property’s price reflects its income-generating potential.

Price drop

At the same time the median price per unit dropped from $380,000 in 2023 to $358,000 in 2024. The median gross rent multipliers also decreased from 14.21 to 12.58 year over year. Except for luxury Southern Marin apartment properties, with GRMs gross revenue multiples from 15.5 to 16.8, most of the closed sales volume was in San Rafael where properties turn over the most.

In multifamily real estate, gross rent multiplier (GRMs) is an estimate of property value, comparing property price to annual rental income. Lower GRMs can mean a better value, depending on a property’s expenses and other factors.

Pushing up the total dollar volume of multifamily property sales in the county last year was the sale of a 249-unit Larkspur property at 100 Old Quarry Road, which sold for $131 million in October. The remainder of the sales of properties with five-plus units were buildings from five to 22 units with most owners retiring from real estate management and either cashing out, carrying short-term financing or exchanging via Section 1031 tax deferment into properties that aren’t management intensive.

Inventory increases

Even with the large increase in sales, many owners that listed their properties last year did not secure a buyer and plan to return to the market this year with their properties offered at a lower price.

I expect to see increasing inventory this year as longtime owners retire, even more creative deal making and lower prices to match the closed sales in 2024.

Prices peaked

If you are planning on selling be aware that prices have already peaked, and we are on our way back down to lower prices that will yield better returns for the real estate investor.

Rents declined

Last year Marin County rents softened as the vacancy rate rose to 4.7% according to a recent Costar rental survey. The county population has declined by 1.2% year over year, as tenants moved back to San Francisco or moved out of state to seek cheaper housing.

Especially hard hit were the Southern Marin cities of Sausalito, Tiburon and Mill Valley, where vacancy rates were over 6% starting in midsummer of 2024. Owners are reporting that it is taking months instead of weeks to fill vacant apartments.

Owners lowered rents

Many landlords are now lowering rents in order to fill units. Most of the rent growth in the past 3 years was due to tech workers moving from San Francisco to find cheaper housing.

Now with the tech layoffs in San Francisco, Marin landlords are seeing declining demand for Marin rental housing.

San Rafael rents flattened

In Central Marin, where rental housing is cheaper and more abundant, rents are flat with the vacancy rate around 4%. Two thirds of rental housing units in San Rafael are filled with lower income tenants who work in the Marin County service industry.

The weak population growth in the County and higher rents will continue to affect rent growth in 2025 and rents are expected to be flat.

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