Is the city population likely going to increase or decrease?

Two reasons for that: tax depreciation decreases over time (so you're losing that benefit) and second the house is aging making for higher maintenance costs and less appeal (think of what's cool to new couples in 10 years; Smart Homes, nice design etc... these need a newer house foundation not something built in 1983).

Fair analysis.BTW, according to this article, prices actually decreased in the first half of this year.

The city is actively working to get rid of these illegal units and actually paying landlords to decommission legal units around the city to decrease density and crime.

As @Brandon Johnson mentioned, be sure to carefully screen your next tenant to at least decrease the chances of selecting problematic tenants.Regarding their request, for a first timer you did great and followed what I consider to be protocol.  

However, I do not expect prices to decrease in the next 2 years, so I would like to purchase in spite of the market being so hot.

So my thinking was to put down a larger down payment in order to decrease the monthly payments enough to point one unit would cover my expenses.

Maybe you will decrease your costs so much over time such that you can begin to fund a future location.

The higher end of parts of tacoma are 180-220 per sqft and the lower sqft SFR ranges where homes are 700-950 sqft are getting near 300 per sqft but that is an anomaly in the lower sqft homes where an investor can exploit if there is a big spread between acquisition, rehab, and ARV at the end.Each area varies like with any other city, just like how higher sqft ranges start to see a decrease in price per sqft, usually 2500 sqft -4000 sqft+.There is a big difference between south tacoma and east side tacoma.  

At some point, demand decreases or stagnates at the same time supply increases, resulting in a sharp drop in prices — and the bubble bursts.