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March 03, 2008

Measuring change the right way

Big numbers can sometimes trip us up. For example, in looking at the recent increases in taxable property values in Wake County, many owners saw hikes of 50 percent, 100 percent or even 200 percent. These seem like huge gains, but are they? Listen

"Well, these big numbers can be deceiving, and the best way to look at these numbers in evaluating them is to look at them at an annual rate, that is look at the annual rate of increase. Now this is actually a little more complicated than just dividing by the number of years over which the increase has occurred, but that actually gets you close. So let's take some examples. In the case of the Wake County property reevaluations, the change in property values actually was over eight years, so those increases were increases over eight years. So for example, a 50 percent gain over eight years actually comes to a 5.1 percent annual gain. A 100 percent increase is a 9 percent annual increase, and a 200 percent is a 14.7 percent annual increase. So I think it's good to put these numbers in these annual perspectives because then you can evaluate really how fast your property value has been going up and maybe compare them to other investments that are typically quoted on an annual basis like the stock market or gains on a CD or bond. And what this does is get you to an apples and apples comparison."

Posted by Dave at March 3, 2008 08:31 AM