If you're considering purchasing a home in Tacoma, Washington as an investment opportunity, you must read this entire article. Tacoma, Washington has long been eclipsed by Seattle. If anyone outside the area was familiar with it, it was as a distant suburb of Seattle. Nonetheless, this is one of the reasons to consider Tacoma's real estate investment. Let's first gain a better understanding of the Tacoma real estate market statistics before discussing the ten reasons to invest in this city.
The third-largest city in a state is frequently a better investment than the largest, as demand is strong but not so high that investors fear being priced out of the market or trapped in a bubble. Tacoma, Washington is the state's third-largest city. Short-term real estate investors have found favorable returns in Tacoma over the last twelve months. In general, the housing supply in Tacoma remains well below normal levels. That’s been the case for several years.
Tacoma is home to about 220,000 people, according to the 2020 census. Tacoma is currently growing at a rate of 0.78% annually and its population has increased by 11.52% since the most recent census. Tacoma is also a satellite city located at the southern end of the Seattle metropolitan area, growing in size as the Seattle metropolitan area expands around Puget Sound. Additionally, it serves as the regional hub for the southern Puget Sound region, which is home to approximately a million people. Let’s take a look at the Tacoma real estate market trends in 2022.
Tacoma Housing Market Trends & Forecasts 2022
According to Realtor.com's previous month's statistics, Tacoma is a seller's housing market, meaning that there are more buyers than available homes. For the past 6 to 7 years an extreme drop in inventory led to a steep rise in Tacoma home prices, as buyers competed over a dwindling number of properties on the market. Tacoma has a history of being one of the best long-term real estate investments in the United States.
Tacoma-Lakewood, WA is ranked #48 in the FHFA HPI® Top 100 Metro Area Rankings based on house price change in 2021 Q4. In Tacoma-Lakewood, WA house prices rose 16.3% over the past year and rose 2.8% over the last quarter (FHFA HPI®). The Cumulative change in house prices since 2007 has been 83.7%.
Tacoma Housing Prices & Demand
The median list price of homes in Tacoma, WA was $450K in February 2022, an increase of 12.5 percent year over year. The median price per square foot for listings was $310. The median price of a home sold was $468,000. The sale-to-List Price Ratio was 101.73 percent, indicating that homes in Tacoma, WA sold at approximately the asking price.
- The average number of days on market in Tacoma, WA is 26.
- The trend for median days on market in Tacoma, WA has gone down since last month, and flat since last year.
- Northeast Tacoma has a median listing price of $640K, making it the most expensive neighborhood.
- South Tacoma is the most affordable neighborhood, with a median listing price of $399K.
- Tacoma's median rent is $1,600.
Data by Redfin, a real estate company, shows that the Tacoma housing market is most competitive. It named Tacoma’s housing market the fastest-selling one in the country in January 2021. Homes in Tacoma receive 6 offers on average and sell in around 5 days.
- In February 2022, Tacoma home prices were up 18.8% compared to last year, selling for a median price of $474K.
- On average, homes in Tacoma sell after 6 days on the market compared to 5 days last year.
- There were 285 homes sold in February this year, down from 326 last year.
- The average homes sell for about 4% above the list price and go pending in around 5 days.
- Hot homes sell for about 9% above the list price and go pending in around 4 days.
Tacoma Rent Prices 2021
As of April 02, 2022, the average rent for a 1-bedroom apartment in Tacoma, WA is currently $1,450. This is a 0% increase compared to the previous year. Over the past month, the average rent for a studio apartment in Tacoma remained flat. The average rent for a 1-bedroom apartment increased by 4% to $1,450, and the average rent for a 2-bedroom apartment remained flat.
- The average rent for a 2-bedroom apartment in Tacoma, WA is currently $1,695. This is a 5% increase compared to the previous year.
- The average rent for a 3-bedroom apartment in Tacoma, WA is currently $2,395. This is a 19% increase compared to the previous year.
- The average rent for a 4-bedroom apartment in Tacoma, WA is currently $2,695. This is an 8% increase compared to the previous year.
Pierce County Housing Market Trends 2022
Total active listings for single-family homes were down 9.01 percent year over year, according to the February home sales report from the Northwest Multiple Listing Service. The median closed sale price for existing single-family homes in Pierce County increased to $535,000, up from $462,000 in Feb 2020, an increase of 15.80% year over year. Pierce County's median closed sale price for condominiums was $400,000, up 26.8 percent year over year. Real estate agents in the area estimate that approximately 75% of all sold properties in Pierce County during the past six months were sold in a week or less. There is only about two weeks' worth of inventory remaining on the market.
- Months' supply of inventory for single-family homes is 0.53.
- Months' supply of inventory for condominiums is 0.49.
Tacoma Real Estate Market Forecast 2022
Since Apr 2012, the home values in the city of Tacoma have appreciated by nearly 206.7% — Zillow Home Value Index. As you can see in the graph given below, the home values increased consistently, starting in the spring of 2012 and continuing through 2022. The current typical home value of homes in Tacoma is $490,811. ZHVI represents the whole housing stock and not just the homes that list or sell in a given month. It indicates that 50 percent of all housing stock in the area is worth more than $490,811 and 50 percent is worth less (adjusting for seasonal fluctuations).
In Feb 2021, the typical value of homes in Seattle was around $407,000. Home values have gone up 20.6% over the past year alone. It shows that Tacoma is a sizzling hot seller’s real estate market. Similar growth has been recorded by NeighborhoodScout.com. Their data also shows that Tacoma's real estate appreciated 137.74% over the last ten years, which is an average annual home appreciation rate of 9.05%, putting Tacoma in the top 10% nationally for real estate appreciation.
During the latest twelve months alone, the Tacoma appreciation rate has been averaging 19.13%, and in the latest quarter, the appreciation rate has been at 8.38%, which annualizes to a rate of 37.96%. This figure also corroborates Zillow's positive forecast, so the home prices in this region are expected to increase in the next twelve months. It means that there is a situation in which demand exceeds supply, giving sellers an advantage over buyers in price negotiations. That's how the housing prices increase in a region. The strong price appreciation we saw in 2021 will continue in 2022 as the biggest price boost will occur during to peak buying season.
- The typical home value of homes in Pierce County is $544,757, up 21.8% over the past year.
- Tacoma home values have gone up 20.6% over the past year and will continue to rise over the next 12-months.
- Seattle-Tacoma-Bellevue Metro home values have gone up 23.8% over the past year and they will continue to rise at a similar pace over the next 12-months.
- The typical home value of homes in Bellevue is $1,446,106, up 27.5% over the past year.
Where Should You Buy Real Estate In Tacoma, WA?
There are 201 schools in Tacoma, WA. There are 83 elementary schools, 36 middle schools, 43 high schools, and 39 private & charter schools. There are 21 neighborhoods in Tacoma. Some of the best neighborhoods in or around Tacoma, Washington are South End, North End, and Eastside. Here are the 10 Highest Appreciating Tacoma Neighborhoods Since 2000 (List by Neigborhoodscout.com).
- Downtown Tacoma
- Central Tacoma East
- Central Tacoma
- Downtown Tacoma South
- Salishan
- Eastside North
- Central Tacoma Southeast
- Eastside
- Wapato Hills Park
- South Park
Tacoma Real Estate Investment Overview
Is it worth buying a house in Tacoma, WA? Investing in real estate is touted as a great way to become wealthy. Is buying an apartment in Tacoma a good investment? Many real estate investors have asked themselves if buying a property in Tacoma is a good investment? You need to drill deeper into local trends if you want to know what the market holds for the year ahead. We have already discussed the Tacoma housing market trends & forecasts for answers on why to put resources into this sizzling market.
Although this article alone is not a comprehensive source to make a final investment decision for Tacoma, we have collected ten evidence-based positive things for those who are keen to invest in Tacoma real estate. Single-family detached homes are the single most common housing type in Tacoma, accounting for 62.24% of the city's housing units. Other types of housing that are prevalent in Tacoma include large apartment complexes or high-rise apartments ( 26.50%), duplexes, homes converted to apartments or other small apartment buildings ( 7.66%), and a few row houses and other attached homes ( 3.20%).
The most prevalent building size and types in Tacoma are three and four-bedroom dwellings, chiefly found in single-family detached homes. The city has a mixture of owners and renters, with 50.37% owning and 49.63% renting. Investing in Tacoma real estate will fetch you good returns in the long term as the home prices in Tacoma have been trending up year-over-year. Let’s take a look at the number of positive things going on in the Tacoma real estate market which can help investors who are keen to buy real estate in this city.
The Benefits of Being a Suburb of Seattle
One of the reasons to consider buying Tacoma real estate investment properties is that it is a satellite city of Seattle. You benefit from the growth of Seattle by buying Tacoma real estate investment properties before they start to skyrocket in value. By moving to the suburbs, you get away from the 800,000-dollar median home price in Seattle and more than the 600,000-dollar price tag that comes with the average home in King County. Property values across the Puget Sound area are soaring as businesses and people relocate here from the insanely expensive San Francisco real estate market.
There are many reasons to consider snapping up homes in the Tacoma real estate market, and more than one includes being within commuting distance of Seattle’s job market without being subject to Seattle’s often insane politics. Tacoma doesn’t have the same homeless issue Seattle does. Tacoma is a sizable port city attracting businesses afraid of Seattle’s threatened head tax. Seattle tried to pass an income tax, but that won’t hit people living and working in Tacoma.
The median home value in the Tacoma housing market was just under three hundred thousand dollars in 2018. Yet the lower cost of Tacoma housing is causing many to move from Seattle to Tacoma, driving up home prices in Tacoma. After all, 300K is half the price of a 600K starter home in Seattle. Property values in the Tacoma housing market have now crossed $450K, up 24 percent over the past year, and are projected to continue to rise in the next twelve months. Investors will appreciate being able to snap up two properties in the Tacoma housing market for the price of one in Seattle.
The More Stable Housing Market
The Tacoma area is treated as separate from Seattle, because of the stark differences between their economies. For example, the home of Microsoft and Boeing has an unemployment rate near 3 percent, whereas the unemployment rate for those living in the Tacoma housing market is close to 6 percent. The Tacoma area is picking up more jobs as businesses relocate from Seattle and San Francisco. That is contributing to the two percent job growth year over year in Tacoma. This will increase prices in the Tacoma real estate market but won’t lead to a housing bubble that could burst.
Pandemic update: As of Sep 2021, Tacoma, WA Unemployment Rate is at 4.5%, compared to 5.60% last month and 9.80% last year. This is lower than the long-term average of 7.42%. Tacoma has seen the job market increase by 1.8% over the last year. Future job growth over the next ten years is predicted to be 39.9%, which is higher than the US average of 33.5% (bestplaces.net).
The Long Term Impact of Geography
Tacoma sits at the southern end of Puget Sound and straddles Commencement Bay. Being a large port town, it is already flanked by smaller cities and backed by mountains. This prevents the city from simply expanding outward, forcing developers to pay for the more expensive redevelopment of existing properties. This will keep prices in the Tacoma real estate market high as long as the job market remains strong. It certainly limits the ability to quickly bring new supply to a tight housing market that has only 0.66 months of inventory on hand.
The Large Military Population
Tacoma is ten miles from the Lewis-McChord joint base. This joint Army-Air Force base is one of the biggest employers in the area, employing more than sixty thousand people. This dumps many renters into the Tacoma housing market who won’t be buying when interest rates drop or their personal financial situation improves.
The Sizable Student Market
The Tacoma housing market is ideal for those who want to rent to college students. By being home to so many universities, it allows investors to diversify their holdings instead of being beholden to the reputation and enrollment of any particular school. Tacoma is home to the University of Puget Sound, the University of Washington Tacoma Campus, Faith Evangelical College, Pacific Lutheran University, and St. Martin’s University to name a few. A side benefit of owning Tacoma real estate investment properties is that you will be able to rent it out to the half of the population that rents if fewer students are interested in renting it.
The Relative Landlord Friendliness
Washington State is not the most landlord-friendly, but it beats both California and Oregon in this regard. More importantly, the Tacoma real estate market is more friendly to landlords than Seattle is. For example, Seattle banned landlords from screening qualified tenants. Under their rules, landlords would have to rent on a first-come, first-served basis. You can’t choose the tenant who seems more likely to pay the rent on time and less likely to create disturbances.
You can’t even choose someone with better qualifications like a better credit score and superior references. Note that the entire state is swinging further to the extremes in the name of aiding tenants. For example, Tacoma recently passed a law requiring two months’ notice for no-cause evictions while state law mandates three weeks. You also have to give someone four months’ notice if you will be displacing them to remodel the property or change its use.
The Relatively Favorable Tax Climate
Washington State came in 28 out of the 50 states in terms of its state and local tax burden. That alone makes it a far better choice for investors than California. There is no personal or corporate income tax. Sales taxes are relatively high, but that doesn’t affect owners of Tacoma real estate investment properties. Property tax rates for the state can be described as average. One of the benefits of the lower home values in the Tacoma housing market is that you’re paying 0.85 percent property taxes on half the assessed value of a comparable home in Seattle.
Best of all, Washington State is going to reduce property tax levies in 2019. Furthermore, the city can’t increase its property tax collections by more than one percent year over year, so you won’t face massive hikes in your property tax bills even if property values do go up to ten percent a year. For the sake of comparison, Texas limits increases in assessed property values to ten percent a year, and property tax rates can go up at the same time.
Conclusion
Maybe you have done a bit of real estate investing in Tacoma, WA but want to take things further and make it into more than a hobby on the side. It’s only wise to think about how you can and should be investing your money. If you are a home buyer or real estate investor, Tacoma real estate investment definitely has a track record of generating one of the best long-term returns in the U.S. through the last ten years. If you invest wisely in Tacoma real estate, you could secure your future. If you are a beginner in the business of cash flow real estate investing, it is very important to read good books on real estate.
Most investors naturally gravitate to residential property investment. When looking for the best real estate investments, you should focus on markets with relatively high population and employment growth. Both of them translate into high demand for housing. If housing supply meets housing demand, real estate investors should not miss the opportunity since entry prices of homes remain affordable.
You must also collaborate and learn from savvy real estate investors who have retired early on in their lives by investing in some of the best real estate markets like Tacoma, WA. Rents and property values in the Tacoma area are rising due to increased demand and constrained supply. This is an ideal time to buy. Furthermore, there are many reasons to consider investing in Tacoma real estate over homes and condominiums in nearby housing markets.
Buying an investment property is different from buying an owner-occupied home. Whether you are a beginner or a seasoned pro you probably realize the most important factor that will determine your success as a Real Estate Investor in Tacoma, Washington is your ability to find great real estate investments in that area.
According to real estate experts, buying in a market with increasing prices, low interest, and low availability requires a different approach than buying in a cooler market. We strive to set the standard for our industry and inspire others by raising the bar on providing exceptional real estate investment opportunities in U.S. growth markets. We can help you succeed by minimizing risk and maximizing profitability.
The other best place in Washington to invest in real estate is Spokane. Spokane is a relatively cheap real estate market on the West Coast. It is already seeing increased demand and property valuations, while it remains a safe place to invest in real estate. Skip Seattle and Silicon Valley and invest in the future growth of Spokane. One reason why Spokane long lagged behind Seattle was its higher unemployment rate. Seattle has a roughly 3% unemployment rate, significantly lower than the 5% unemployment rate seen in Spokane. Spokane’s economy, though, is seeing a surge in higher-wage jobs.
Out of the tens of thousands of new jobs created since 2010, the majority of them pay more than the average county wage – which is in line with the national average. The promise of better pay will lure many people to Spokane to live, fueling demand for the Spokane real estate market. Another hot place in Washington to invest in real estate is none other than Seattle. Seattle is a pricey but sizzling market-making news all around the year. Seattle has long been second to Silicon Valley, but its strong economy, diverse population, and better regulatory climate are bringing refugees from California and migrants from around the country and world to live here.
Regardless of the area’s weather, the Seattle housing market’s outlook can only be described as sunny. Seattle has repeatedly hit lists as being among the top cities for real estate sellers to get the highest return on their investment. Property values have gone up consistently for years. Rental rates are high and continue to rise, guaranteeing ROI for those who buy and hold properties. This means you will certainly be able to profit from the large rental market in Seattle whether you buy and hold or buy and flip.
Let us know which real estate markets you consider best for real estate investing! If you need expert investment advice, you may fill-up the form given here. One of our investment specialists will get in touch with you to discuss all facets of searching for, buying, and owning a turnkey investment property.
*Remember, caveat emptor still applies when buying a property anywhere. The information contained in this article was pulled from third-party sites mentioned under references. Although the information is believed to be reliable, Norada Real Estate Investments makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. All information presented should be independently verified through the references given below. As a general policy, Norada Real Estate Investments makes no claims or assertions about the future housing market conditions across the US.
References
Housing Market Data, Trends and Statistics
https://www.zillow.com/tacoma-wa/home-values
https://www.zumper.com/rent-research/tacoma-wa
https://www.redfin.com/city/17887/WA/Tacoma/housing-market
https://www.neighborhoodscout.com/wa/tacoma/real-estate
https://www.realtor.com/realestateandhomes-search/Tacoma_WA/overview
https://www.fhfa.gov/DataTools/Tools/Pages/FHFA-HPI-Top-100-Metro-Area-Rankings.aspx?
Not Seattle
https://www.city-journal.org/seattle-homelessness
https://www.washingtonpolicy.org/publications/detail/seattle-tries-to-circumvent-voters-clear-no-on-income-tax
https://crosscut.com/2018/07/priced-out-seattleites-flee-tacomas-getting-more-expensive
Lower cost
https://www.sammamishmortgage.com/tacoma-highest-home-price-outlook
https://crosscut.com/2018/07/priced-out-seattleites-flee-tacomas-getting-more-expensive
Geography
https://en.wikipedia.org/wiki/Tacoma,_Washington
https://www.sammamishmortgage.com/tacoma-highest-home-price-outlook
Student market
https://www.collegesimply.com/colleges/washington/tacoma/four-year-colleges
Stable housing market
https://www.seattletimes.com/business/economy/the-seattle-tacoma-economic-divide-persists
https://www.bestplaces.net/economy/city/washington/tacoma
Taxes
https://taxfoundation.org/state/washington/
https://www.mansionglobal.com/articles/how-much-will-property-taxes-fall-in-washington-state-in-2019-121772
https://comptroller.texas.gov/taxes/property-tax/valuing-property.php
Landlord Friendliness
https://reason.com/2017/12/28/seattle-bans-landlords-from-screening-te
https://washingtonlandlordtenant.info/tacoma-landlord-tenant-law/new-tacoma-rental-housing-law
