Many of us (me included) are cautiously optimistic about the Real Estate Market in Tacoma given the huge surge in home prices in the last year. Is our Real Estate Market going to continue to appreciate 17%+ year-over-year as the witnessed in 2021? Is that possible? How does our Real Estate Market compare to the 2006 – ‘07 market crash and are we facing another doomsday? I’m going to do a short breakdown of what our Real Estate Market in Tacoma looked like in 2006 compared to now AND show how interest rates are one of the least discussed factors in housing affordability.
I do not expect another “Great Depression”, or anything even remotely similar to that of the 2007 market crash. I do however expect our market to become more balanced once interest rates rise (and they will) but a balanced market is not expected to come for another few years. Our Tacoma Real Estate Market will remain a very competitive Seller’s Market. 2025 is when Chief Economist Patrick Stone expects to see a “healthy” Real Estate Market. While 2022 is expected to be another robust year with strong appreciation, a continued Sellers Market and very few homes homes for sale.
Here are some statistics that suggest that our Tacoma Real Estate Market isn’t going anywhere and despite the huge increase in home prices, statistically the City of Tacoma is just as affordable (if not more) than it was in 2006.
MEDIAN HOUSEHOLD INCOME IN TACOMA 2006 VS 2021
- January of 2006, the median household income was $6,000 per month ($72,000 annually)
- January of 2021 the median household income was $9,300 per month ($111,600 annually)
MEDIAN PRICE IN TACOMA 2006 VS 2021
- January 2006 median price in Tacoma was $300,000
- January 2021 median price in Tacoma was $421,000
Total appreciation for household income between 2006 and 2021 rose 55% while the total appreciation of home values increased from a median price point of $300,000 to $421,000. This 41% appreciation is nothing to snuff at! But fortunately our household income rose 14% more in the same time frame.
INTEREST RATES ARE THE X FACTOR
Here is the big kicker – Interest rates in 2006 were at 6% while in 2021, they hovered around 3%. Today, in Summer of 2022, rates are back around where they were in 2006. Below is a quick breakdown to show how this shakes out for your monthly mortgage payment:
MEDIAN MONTHLY MORTGAGE IN TACOMA 2006 VS 2021
- 2006 – $300,000 X 6% interest = $1,800 monthly mortgage payment
Monthly household income = $6,000 which means 30% (on average) of homeowners total income was going towards their mortgage payment every month.
- 2021 – $421,000, 3% interest = $1,783 monthly mortgage payment
Monthly household income = $9,300 which means 19% (on average) of homeowners total income was going towards their mortgage payment.
On average, homeowners have 11% more available funds when compared to 2006.
To gain some additional perspective on interest rates and specifically how they affect your mortgage payment, watch this video!
We are now in the second quarter of 2022 and our Median price in Tacoma has soared to a record high of $559,000. Despite the comparisons of numbers from 2006 – 2021, our city’s focus on affordable housing is an important one. Not all of our neighbors have experienced the 55% increase in wages and there is no denying the growing homeless population in our City. Click here to learn more about what The City of Tacoma is doing to build more affordable housing and accommodate the growing number of people moving to Tacoma
Ready to talk numbers and see what loan type would be best for you when purchasing a home? Click here to learn all about the various loan types that are available. It’s never too early to talk to a local lender to get qualified.
For more information on interest rates and how they impact buying power and affordability click here
A MESSAGE TO TACOMA HOME BUYERS:
Don’t expect home values to stop appreciating come 2022. If you want to buy a home, get honest with yourself. Writing a winning offer in our market (especially for those under the median price point) usually requires it be written with very competitive terms and higher than the listed price (if the property is priced well).
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A MESSAGE TO TACOMA HOME SELLERS:
Despite the expectations that our real estate market will continue to appreciate, don’t relax your standards when selling your home. Imagine it’s your home’s big day (wedding, party, massacre – whatever resonates with you!) when listing it for sale. Make it easy for buyers to “say yes”. I’ve never had a client regret the proper preparation after we sold their home. It results in high profit, an easier and more timely sale. For more information on how to prepare your home for sale in Tacoma, take a few minutes to read this blog.
