Market Breakdown - Tacoma, WA is one of the hottest real estate markets in the country. Below are some reasons why Tacoma is a great place to own a rental property.
First of all, cheers to 2020 being in the rear view! It’s been an especially challenging 18 months for landlords with various moratoriums and restrictions in place. Many things have changed due to the pandemic with population shifts coupled with massive job market and behavioral fluctuations. Although the turmoil has been very real, Tacoma still remains a great place to own a rental property. In fact, Tacoma has seen a significant increase in rents (7% YOY) especially when compared to Seattle (which saw rents decline by 11% YOY) according to RentCafe.
There are many reasons why Tacoma is a fantastic place to own a rental property. In this article we’re going to look at the macroeconomic factors driving the rental market in Tacoma. Keep in mind each neighborhood (and even each street) will vary and have it’s own microeconomy.
A 1-bedroom apartment in Tacoma is now renting for $1,450 per month - this compares to a median of $1,339 across Washington state. Over 50% of 1-bedrooms in Tacoma rent between $1,000 - $1,500 per month.
The average home value in Tacoma is about $430,000, according to Zillow, which is an increase of 19.6% YOY. While that is a phenomenal increase (and hindsight is 20/20), $430,000 is a pretty good entry point when you look at prices across the Puget Sound region:
Seattle average home value: ~$831,000
Bellevue average home value: ~$1,144,000
Kirkland average home value: ~$932,000
Lynnwood average home value: ~$631,000
Past performance is by no means a guarantee of future appreciation, but the increase in home value does indicate demand for Tacoma real estate. Here are some additional reasons why Tacoma is a solid place to own a rental property:
Joint Base Lewis-McChord sits just a few miles away (providing a steady flow of new residents)
Roughly 57% of homes are owner occupied versus 42% being renter occupied (lower supply of rentals)
There are several colleges in Tacoma (University of Puget Sound, University of Washington Tacoma, Pacific Lutheran) with student populations who rent
The proximity to Seattle means people can commute from Tacoma (if they choose to fight the infamous Seattle traffic)
The population of Tacoma has increased by roughly 10% over the last 10 years, up to about 218,000
In general, people are moving to the state of Washington (almost a 15% population increase over the last 10 years according to the US Census Bureau)
Household income has also climbed recently in Tacoma. The American Community Survey conducted by the US Census Bureau in 2020 reported a median household income in Tacoma of over $62,000 - an increase of about 11% over the previous 3 years. This is strong growth and an indication of a financially stable tenant population.
Another major factor we are seeing nationally is population shifts from large cities to smaller, more rural areas. This may be optimistic news for a city like Tacoma which has a sizable population, but not nearly the size of Seattle. A question mark moving forward will be whether employers start requiring workers to come back to the office once the COVID-19 pandemic is under control.
On that note, it’s important as a landlord to remain up to speed with all things pandemic and moratoriums. A great resource for the latest is the Rental Housing Association of Washington - check out their COVID-19 page here.
Contact us if you’d like to discuss the services we provide landlords in the Tacoma area - happy landlording!