apartment property in the sample has 86 units and 76,688 sq. ft. of improvements. In
contrast, the average apartment property sold in the 15 markets has 27 units and 23,034
sq. ft. of improvements.
The estimated coefficient on the variable of interest, EXREPL, is positive and
significant in 12 of the 15 regressions. This provides evidence that buyers of replacement
properties are paying statistically significant price premiums in the majority of the larger
markets contained in the regression sample.
The coefficient estimates ofEXRELQ are generally positive and significant in 7 out
of the 15 regressions. However, in only three of the regressions are the coefficient
estimates on relinquished exchanges higher than the coefficient estimates of replacement
exchanges. Casual observation shows that relinquished exchanges have significant and
positive coefficients in markets that have seen more appreciation in residential real estate
than others. In addition, it is important to remember that if the main motivation to enter
into an exchange is to postpone capital gain taxes, properties that are part of relinquished
exchanges will tend to be ones that have seen more capital appreciation than other
markets. Hence, all else the same, they will tend to be more expensive properties.
Therefore, the observed positive coefficients provide evidence that sellers enter in tax
delayed exchanges when their properties have appreciated in value. This positive effect
on price may offset any other possible negative effects related with relinquished
exchanges and thus I can not make any conclusions about the magnitude of the price
impact related to a sale being part of a relinquished exchange.
With replacement exchanges, there are no such issues; and therefore all else equal
the coefficient on EXREPL can be directly associated with a price premium paid when