Tacoma Real Estate Market Listings Soar, Prices Drop

The number of listings in the Tacoma Real Estate Market has ballooned to over 2600 in the MLS. There were 250 SFH Listings on the Tacom Real Estate Market in May of 2006, that is over a 1000% increase since I started tracking inventory on my own.

Prices have dropped close to 10% from last year. Sales are down 25% from a number that already saw the inventory outstripping the demand. Mortgages are harder to get. Washington
was deemed a "soft" market making mortgage insurance companies shut off 100% financing.

Have you tried getting a non-owner occupied loan with a LTV for more than 80%? They basically don't exist, taking another segment of the buyer population out of the picture. Even if prices keep dropping, many Americans don't have the savings to put 20% down.

One disconcerting factor that has gotten some media attention but has not been internalized by many in the Real Estate market today is demographics, good old demographics.

There are 78 million baby boomers approaching retirement fast, with the upper limits already making the transition. Their typical real estate life cycle involved trading upwards for bigger and bigger home ala the McMansion in the suburbs. The problem is that many Gen X'ers even in places like Tacoma, myself include, do not want a sprawling house in the suburbs with the awful commute. What will be done with these homes in the current Real Estate Market crisis?

Time will only tell....

Confessions of a Tacoma Real Estate Entrepreneur

Every investor will have their collection of tales in real estate investing. They will have the tale of the "one" that got away. They will have their defining moments in defeat and in victory. I would like to share such a tale with you.

In Late Summer of 2006, I was heavily invested in the Sixth Avenue district in Tacoma. I had researched every parcel up and down that business district, primarily because of the zoning (which is mostly Residential Commercial Mix-Use and Neighborhood Commercial Mix-Use). I felt strongly that Sixth Avenue would become the next Capital Hill in Tacoma. The district is still mostly made up of single family homes but with great zoning and is within walking distance of a lot of great restaurants and bars.

As I dug deeper into the zoning (height limit for most parcels between Pine and State Streets and N. 8th and S. 8th is 45') and the parcels in the area, I realized that sooner or later land prices would become a premium. Why?

SFH prices were high and far outpriced the value of the land they sat on. Homes in the area typically go for 250k plus and usually sit on a smaller than 5k square foot parcel. Actually, there are very few SFHs that sit on anything larger than a 5k lot. I used the mapguide viewer on the City of Tacoma's GovMe site extensively for this. This research led me to make two decisions first I bought a four plex sitting on a 7800 square foot lot that had a nice rental income stream and was well priced at the time. And secondly, I targeted several parcels for acquisition.

One such parcel was located across the Jack in the Box on State Street, it was a small three bedroom rental on a 10k lot. The owner was in the local area and bought it for less than $150k. She had owned it for about three years. I cross referenced her name with White Pages, got a number, and made the call.

I told her I was a local real estate investor and was interested in her house on State street. I asked her if she had any intention of selling and she said she didn't. Not wanting to lose the opportunity, I made a verbal offer of $300k on the spot. She took a deep breathe and asked if I was serious, I said absolutely and said there would be an written offer to her in an hour.

I wrote the offer up with and/or assigns (I like having flexibility), and it was accepted. I knew the land value of the property was worth significantly more than $30/sq ft, so I reached out to several area investors and ended up assigning the contract to a Seattle developer for $17k. Not a bad little deal for the amount of time invested. By the way there are no other SFH on 10k lots in the Sixth Avenue Area that would be at this price point (I have looked).

Look for opportunities, aggressively pursue them, make a strong offer and move the deal.

I use Redfin ...

I use Redfin to look at Real Estate lisitings in Seattle and Tacoma. I used to use Windermere (they uploaded new listings the quickest) and John L Scott is nice for some commercial listings (why can't the CBA website have rendered graphic listings over a map???).

I use Redfin due to two facts.

1. I love to see what I might save if I don't use a traditional buyer's agent (I usually end up telling them which listings I want to view anyways, they just have the MLS Key).

2. They have unique features that shows the number of days on Redfin (on the market) and the price chanes to the listings. Not to mention the tax and parcel information that normally I would have to go to Pierce County's Assessor-Treasure site or Tacoma's Government Made Easy site (easily the best tool for an investor in Tacoma).

An good article outlining the current state of the Tacoma Real Estate Market...

Forbes.com article 9/22/06

Check out their 10 year prediction for Seattle, though! I think Seattle / Tacoma is a great place to live and not in the same shape as other metro areas but 60% gains over the next 10 years is a little optimistic, I believe.

I Love the Sixth Avenue District in Tacoma

Great Article about Sixth Avenue in the News Tribune

Sixth Avenue is a growing hotspot in Tacoma, with great restaurants and a strong nightlife. Zoning in the area is robust and there is talk on the city council of increasing the density of the zoning. The majority of my own investments are in this area.

I am a member of the Sixth Avenue Merchant's Association, and we are incredibly involved in Tacoma. Please support Sixth Avenue!

If you need any incentives go grab a pizza from Primo Grill, they have great food.