The real estate market in Washington state is booming. It’s not only Seattle that’s experiencing record-pricing home sales. According to The News Tribune, housing prices are rising faster in Washington than in any other state. Statewide, home prices rose about 10 percent compared with a year ago. Although the Seattle market drives the rest of the state, the Tacoma new home market is not far behind with prices rising roughly 8 percent from 2015 to 2016.
Market Conditions in Tacoma
Tacoma is the third largest city in the state of Washington. It’s home to the 10th largest container port in North America, Joint Base Lewis-McChord, and many cultural attractions, such as the Museum of Glass and Tacoma Art Museum. Nicknamed the City of Destiny, this community has also been called one of the most livable areas in the United States.
Trulia reports that 63 percent of Tacoma residents are already homeowners. The median age is 37, well above the national median age of homeowners. Approximately 30 percent of the residents are college-educated, which also boosts the chances of homeownership. Tacoma’s safe streets, mild weather and good air quality are just a few of its selling points.
According to U.S. Department of Housing and Urban Development (HUD), the economy in the area began improving in 2011, after the 2008 Great Recession. The jobs lost during that national recession have been recovered. Economically, Tacoma is in a great position for home ownership. The 2015 estimated median household income in Tacoma is about $52,000. In October 2017, the unemployment rate was 4.7 percent, down from 5.2 percent in May.
The median home price in Tacoma is $261,100, which is much lower than the median home price of $697,700 in Seattle. The high price of homes in Seattle has increased demand for properties in Tacoma, because homeowners can purchase more home. Home values in Tacoma have been on the rise since 2013, and most predict that the market will continue its upward climb. Zillow recently released its market forecast for 2018, estimating that housing prices will continue to rise by 4.4 percent over the next year.
According to Zillow, the Tacoma real estate market is healthy. Only about 7.3 percent of home mortgages have negative equity, compared with the national average of 10.4 percent. About 1.6 percent of homeowners are delinquent on the mortgage. Appreciation of homes is slowing down, whichcould mean that the market will stabilize after years ofvalue appreciation. However, some experts point out that limited inventory in the Tacoma area may mean higher prices because demand is on the rise.
The Market for New Construction in Tacoma
According to HUD, the market for new single-family homes is improving since 2011, when it had 5 years of decline. Increased population growth and improved economic conditions account for this. In 2014, new home sales declined, due to a decrease in construction, not because demand waned. HUD anticipates that demand will be greatest in the $200,000 to $299,999 price range, but new construction homes will be in demand in all price ranges.
Northwest MLS reports that “the majority of new listings are selling within their first 30 days on the market.” Lack of inventory is keeping this market a seller’s market, but there are potential problems in sales if the proposed tax reform goes through as it is currently written. Some of the provisions in the bill have the potential to negatively affect homeownership, not only in Tacoma, but nationwide. However, Northwest MLS also forecasts a robust market in 2018, the tax bill notwithstanding.
Concerns of a Bubble
Some experts have voiced concerns over a housing bubble in Washington, because of the increase in demand with limited availability. Local real estate experts don’t believe a bubble is coming. The conditions which led to the last bubble before the 2008 recession, aren’t present. Local buyers are putting down big down payments, paying their mortgage on time and have good credit scores. With home prices rising at a lower rate, this foretells a flattened market, which could be good for buyers.
One thing is certain. Tacoma is a great place for homeownership, especially when compared to the Seattle market. It has all the makings to sustain economic growth over the long haul.