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Tacoma’s Housing Market “Wins” Nationally for Speed and Competitiveness

Posted by Johnine Larsen on February 19, 2020
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At the end of 2018, Tacoma surpassed Seattle as the nation’s fastest-rising housing market. Things haven’t slowed down since; in fact, they’ve sped up. Tacoma is now not only the country’s fastest-rising market, but the fastest market overall and fourth-most competitive market. Those terms sound similar, but “fastest” refers to how briefly homes stay on the market, while “competitive” refers to how often they sell above asking price.

Half of all homes on Tacoma’s fastest-in-the-nation market stay there for less than 23 days (down from 36 days a year ago) and many properties sell even faster. It’s not uncommon for a house to appear on the MLS Thursday evening and disappear before the weekend closes out. Comparatively, homes in the nation’s runner-up cities, Rochester, NY and Buffalo, NY spent an average of 28 and 29 median days on the market, followed by Omaha, NE (31) and Sacramento, CA (33).

On top of that, Tacoma is also one of the nation’s most competitive housing markets, second only to three markets in the San Francisco Bay Area: Oakland, San Francisco, and San Jose. In Tacoma, 34.2 percent of homes sell above their asking price.

What this means for the average homebuyer: if you’re looking at a house in Tacoma under $600,000, you can expect it to stay listed for less than a week, and you can certainly expect a bidding war. Potential buyers regularly make bids far above asking, and they also often waive inspections, cover the seller’s closing costs, and throw in other concessions in an attempt to make their offer stand out. It’s exhausting for buyers, especially those who go it alone.

So what’s stomping the gas pedal to floor in Tacoma’s housing market? Why do things keep speeding up over there? If you look at who’s moving into the area, the answer becomes pretty clear. The city’s new residents generally fall into three categories:

  • Californians
  • Tech workers
  • King County overflow

These aren’t the only newcomers, of course, but they’re the three most distinct groups. Washington State has a long history of receiving ex-Californians, and the tech boom has kept this region plentiful with all sorts of programmers, software developers, and other tech employees. Neither of those trends show any sign up letting up.

The third group of new Tacoma homebuyers: people who work in Seattle but can no longer afford to live there. Almost 18,000 King Country residents relocated to Tacoma’s Pierce County in 2017, 25 percent more than two years earlier (according to census estimates). Tacoma residents say certain neighborhoods have turned into bedroom communities, where almost all the homeowners leave before the sun rises, bound for Seattle by way of I-5 traffic. Other newly purchased homes belong to Seattlelites who didn’t move to Tacoma themselves, but bought real estate there anyway as an investment.

This change in Tacoma’s homeowner demographic is reshaping the city’s character, particularly in historically diverse and low-income neighborhoods such as Hilltop, South Tacoma, and Tacoma’s Eastside. Home prices in these neighborhoods have risen nearly one-third each year since 2016, and the newcomers who can afford this steep increase have displaced Black, Hispanic, and Native residents. Hilltop, for instance, has lost about a third of its Black residents, and many of its Black-owned businesses have disappeared. In their place, new business have cropped up, ones that tend to cater to a high-income clientele.

Further adding to the “Seattle-ization” of Tacoma, numerous small businesses have either expanded into the city to capitalize on its growing market (Top Pot Doughnuts, Elemental Wood Fired Pizza, Rhein Haus, El Borracho, etc) or moved there because they’ve been priced out of Seattle right along with thousands of homeowners (Wooden City, Camp Bar, etc). Just glancing at the numbers shows the incentive: a restaurant on Pacific Avenue, one of Tacoma’s busiest barhopping destinations, costs just $15 per square foot to rent. Compare that to the $30 per square foot rental cost for restaurants in Ballard, Fremont, and Capitol Hill, and the decision to relocate makes sense.

But it’s not all gentrification. Tacoma is becoming a destination in its own right. It’s a quirky city that still feels like a small town—especially enticing for all the old-school Seattlelites who decry Amazon’s effects on the grungy city they used to love. Traffic’s pretty mild in Tacoma, too, once you leave I-5, and the city’s public transit keeps expanding. The harbor views are gorgeous, the city has its own historic charm, and Tacoma has more than its fair share of family-friendly parks and neighborhood activities. But nothing seems to draw people to Tacoma like the home values.

In Seattle, the median home value currently hovers around $750,000. The median home price in Tacoma, on the other hand, is $337,940. Is that worth a long commute? Worth finding a new community? Worth battling through the fastest and fourth-most competitive housing market in the United States? Thousands and thousands of former Seattlelites have said yes, and every day, more and more are joining them.

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