Inflation & Time Trending
Market Conditions/Time Trending Explanation
Jefferson County Assessor's Office
2017 Reappraisal: July 1, 2014 - June 30, 2016
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 valuation date. Commonly referred to as time trending, sales must be adjusted to the end of the data collection period (July 1, 2014 through June 30, 2016). 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 2017 Property Assessment Study used to determine county compliance.
In general, this method uses the assessor’s appraised actual values from the last reappraisal (June 30, 2014) and compares it against recent sales data that has occurred during the newer period of July 1, 2014 through June 30, 2016.
This comparison is done using a sales ratio, which is simply the relationship between appraised values and sales prices. For example, a house that had a June 2014 appraised value of $230,000 and sold two years later, June 2016, for $305,000, would have a ratio of 1.32 ($305,000/$230,000). What this one ratio indicates is that the property increased approximately 32% from June 2014 to June 2016. 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, July 2014, and ending June 2016.
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.