Analysis of Contributions of New Construction and Appreciation to Increases in Residential Market Value

New Construction

Data for the market value of all new construction in the state were provided to The Common Interest by the Idaho State Tax Commission. The breakdown specifically for residential new construction was not available in the data they provided. We used the Idaho Construction Report published by 1st Security, and now Wells Fargo, to estimate the percentage of all new construction in the State Tax Commission data that was residential. Because the value of new construction shows up a year later on tax rolls, we also lagged the value by one year in our analysis.

Appreciation

The House Price Index (HPI) is calculated by the Office of Federal Housing Enterprise Oversight (OFHEO). It is based on all conventional, conforming mortgages on single-family properties backed by Fannie Mae or Freddie Mac. OFHEO breaks down the HPI for each state. For more details, go to the OFHEO website.

We multiplied the HPI for Idaho in a given year by the assessed residential market value for that year to calculate the increase in residential market value in the subsequent year that could be attributed to appreciation.

Additional Notes

Row 9 of Table 2 gives the estimated percentage of the increase in assessed residential market value attributable to new construction and Row 10 gives the same for appreciation. The two do not necessarily equal 100%. The estimation methods involve various sources of data and several prior estimations, all of which will introduce a degree of error. As a rule of thumb, it is probably reasonable to assume that our estimates are accurate within +/- 5 percentage points.

The analysis was conducted for The Common Interest by Keith Allred, Ph.D. Keith thanks Alan Dornfest from the Idaho State Tax Commission for assistance and suggestions. Any errors in the analysis are Keith's responsibility. Alan Dornfest has conducted similar analyses that generate similar results.