Summary: While Seattle has conventionally been the sizzling housing market in Washington state, Tacoma and surrounding areas have taken over much of the heat. Prices have increased and demand is high. So, where will things go from here in Tacoma and other cities around it?
Home prices across the U.S. are expected to rise by 2.2% over the next 12 months, according to numerous sources. But there are several real estate markets in Washington State that could soar above this national forecast. Tacoma, Federal Way, and Lakewood are among them.
Multiple home-price forecasts for Tacoma suggest that prices in this city could rise more than the national average, over the next year or so.
Above-Average Home Price Forecasts for Tacoma
Economists with Zillow, for example, recently predicted that the median home value for Tacoma would rise by around 3.4% over the next year. And for Federal Way and Lakewood, those numbers are 0.4% and 3.2%, respectively. This outlook was made in August 2019 and therefore looks ahead to 2020.
By comparison, the company predicted that the median home value nationwide would rise by 2.2% during that same time period.
There are “outliers” elsewhere in the country as well, red-hot real estate markets that are miles beyond average. Boston, MA and Lafayette, IN are just some of them.
Defying Historical Patterns of Price Growth
For most cities across the U.S., house prices are expected to rise at or near historical norms over the coming months. Looking back over the last few decades, home values in the U.S. have risen by around 5% annually. The double-digit gains Tacoma have experienced over the last year have been abnormal, from a historical perspective.
Related: Portland vs. Seattle housing market
Granted, home-price forecasts have to be viewed for what they are — an educated guess. There are many different trends that affect real estate appreciation, on both the supply and demand sides. So it’s nearly impossible to predict with complete accuracy how prices will behave over time.
The one thing that’s nearly certain is that home prices in Tacoma, Federal Way, and Lakewood and the broader metro area will likely continue to rise for the foreseeable future. And they’ll probably do so at a pace that exceeds historical norms.
Buyers Still Competing for Limited Inventory
Inventory is part of the reason for these bold home-price forecasts being issued for Tacoma, and other cities across Washington.
In major cities within the state, there was less than a two-month supply of homes for sale in August 2019. That’s well below what is considered to be a normal or balanced real estate market. During that same month, the nation as a whole had roughly a three-month supply of homes (also below normal). Tacoma, one of the tightest housing markets in the country, has less than a one-month supply. And a similar picture can be painted for nearby Federal Way and Lakewood.
Meanwhile, there’s still plenty of demand among home buyers in the Seattle metro area. Buyers in some neighborhoods are dealing with stiff competition, multiple offers, and in some cases bidding wars. Population growth has a lot to do with this demand.
And even though prices in Seattle have cooled over the past few months, there is still some demand in the area, though not nearly as much as there once was just a few months ago.
Given the current supply and demand situation, it’s no surprise to see strong forecasts for home prices in Tacoma, Federal Way, and Lakewood. The question is, how can high can they go? And will the average household be able to afford a median-priced house, if values keep rising? It’s a trend worth following.