Inflation and Time Trending

Market Conditions/Time Trending Explanation
Jefferson County Assessor's Office
2011 Reappraisal: July 1, 2008 June 30, 2010

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Why Time Trending is Done
Colorado statutes [39-1-104 (10.2) (a) C.R.S.] require all county assessors to analyze sales data to see what differences, if any, there are between the market conditions at the time of a comparable sale and the market conditions at the valuation date for the subject property.

Commonly referred to as time trending, sales must be adjusted to the end of the data collection period (July 1, 2008 through June 30, 2010). Time trending of sales is the usual practice in all types of appraisal work to account for the principle of supply and demand as well as the principle of change.

How Time Trending is Done
There are several methods used to determine the presence of a time trend. The one most frequently used within Colorado is called a Sales Ratio Trend Analysis. It is also the same method used by the auditing firm that will be conducting the 2011 Property Assessment Study used to determine county compliance.

In general, this method uses the assessor’s appraised actual values from the last reappraisal, which reflects a market value of June 30, 2008. This prior value is compared against recent sales data that has occurred during the newer period of July 1, 2008 through June 30, 2010.

This comparison is done based on what is called a sales ratio, which is simply the relationship between appraised values and sales prices. For example, a house that had a June 2008 appraised value of $230,000 and sold two years later, June 2010, for $225,000, would have a ratio of .98 ($225,000/$230,000). What this one ratio indicates is that the property decreased approximately 2% from June 2008 to June 2010. This type of ratio comparison is done to the thousands of sales that have occurred throughout the county. Ratios are graphed by month of sale, starting with the earliest date.

After graphing all ratios, a statistical procedure called “regression” is used. Regression is able to place a line of “best fit” between all the plotted ratios. In effect, it is the slope or angle of this line that is used to determine the presence of any significant inflationary or deflationary trends. An upward line indicates appreciation, downward line depreciation, and a level line no change.

2011 Time Trending Analysis
In the 2011 reappraisal, the Jefferson County Assessor’s office used two of the four state-approved techniques: Sales Ratio and Multiple Regression analyses. The Paired Sales technique had insufficient data sets and was not considered. The analysis for 2011 was complicated due to the combination of REO and regular market sales. Approximately 3,840 Public Trustee Deeds (foreclosures) were recorded in Jefferson County; this was an increase from the previous time frame (3,750 foreclosures). Of the total 4,068 Sale transactions of real-estate owned by lenders (REO) that occurred 57% were considered qualified sales and included in our analysis. The analysis indicated different results by property subclasses and location. Single Family and Duplex/Triplex properties displayed two distinct time trends during the 24 month period, with the exception of Economic Areas 1, 2 and 6 (Westminster, Arvada, Wheat Ridge and Golden) which had no significant time trend. Condos and Town homes as a whole subclass experienced a negative time trend.

The chart below shows the graphic representation of the 24-month time frame. The red line is the regression line and its “best fit” position. The black circles are the median sales ratio for each month. July 2008 is Month 1; December 2008 is Month 6; June 2009 is Month 12; and June 2010 is Month 24.

Single Family Time Trend Study Graph (pdf)

2011 Time Trending Results
The following table summarizes the monthly percent adjustment rates that were applied to the sales and the number of sales used in the analysis.

2011 Time Trending Results Table (.pdf)

Historical Time Trending results by year.

Historical Time Trending Tables

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Last Modified: May 5, 2011 09:37 AM
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