Marin Apartment Market Sees Record Low Inventory

San Rafael-The biggest news for the first quarter Marin apartment sales is the lack of inventory in the county. There are just fifteen complexes listed in the county right now over five units and only three of them are below $1,200,000. The remainder of listed properties are over $2,000,000 and would require a large downpayment or seller assisted financing to allow buyers to purchase.

Local apartment owners that enjoyed record rental increases over the past four years, some as high as 30%, are electing to hold their properties off the market and reap the returns of steady cash flow in a weak economy. Gross rent multipliers of closed transactions are in the high 10X-12X rents range and seem to be holding steady. As long as there is low inventory and more buyers than sellers, prices should remain where they are today.

In the 2-4 unit category, where there is always more buying and selling activity, prices on duplexes have been dropping steadily the past 24 months. In the boom years, when home prices were rising every month, entry level home buyers were turning to duplexes as an entry in to the housing market. Prices on Southern Marin duplexes were well over $1 million and sometimes approaching $2million.

Now there are duplexes in Southern Marin on the market for $700-925,000 and no takers. The owner occupant market no longer exists and investors are demanding that even duplexes pencil out before they make offers. In central Marin duplex prices have now dropped to as low as $360,000 in Fairfax and $665,000 in San Rafael. Certain REO duplexes sold for as low as $399,000 in San Rafael this year.

As prices drop on 2,3, and 4 units I expect investors will come back in to the market, searching for returns to exceed the 2.5% money market rates they are getting now. Purchase of a moderately priced duplex in San Rafael right now will produce a 5% return, double what investors are making by letting their cash sit in the bank.

Fueling the renewed interest in small income properties are low interest rates in the 5% range and the falling prices. I see the second half of 2009 to be very active with new apartment investors throughout the county.

If you would like an in office personal consultation regarding the local apartment market, please do not hesitate to call me at 302-7730 and we can set an appointment.

Regards, 
 
Katherine J. Higgins
Investment Broker
Mobile: (415) 302-7730