Western Water Right Prices Stabilize, Markets Show Signs of Rebounding

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Data released by WestWater Research for its 2013 Water Right Price Index (WRPIx), the leading measure of western U.S. water prices, indicates that water right prices have stabilized in 2012.

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Water Rights Price Index(WRPIx)

Stable water right prices from 2011 through 2012 may suggest that these markets are beginning to turn around. We expect that water right values will start to increase in the coming months with the recovery of the regional economy.

Data through December 2012, released today by WestWater Research for its 2013 Water Right Price Index (WRPIx), the leading measure of western U.S. water prices, indicates that water right prices have stabilized. After two consecutive years of decline, level prices suggest that markets may be turning around.

The WRPIx chart tracks a composite of prices from 14 major and secondary water right markets in the western U.S. In these regions, water rights can be traded separately from land, with an estimated total of $116 million changing hands in 2012. The total value traded and number of transfers both increased from 2011 levels by 26.1% and 47.7%, respectively. Increased trading activity is one indication that the market may be reaching a turning point.        

Regional Markets

A few regional bright spots helped stabilize the market, supporting the belief that prices may soon rebound. In Northern Colorado, owners of Colorado-Big Thompson Project units enjoyed positive price growth following a downslide that lasted nearly a decade. In addition, year-over-year price increases in California were driven by dry conditions statewide and more increases in imported water costs in Southern California. The map below illustrates pricing trends in key markets throughout the west.

As the map above depicts, index gains from the Northern Colorado Water Conservancy District and California markets were offset by declining prices in Nevada’s Truckee Basin, New Mexico’s Middle Rio Grande Basin, and Colorado’s South Platte Basin. In New Mexico and Nevada, water right prices are linked to land development and a sluggish real estate market caused trading activity and prices to continue to slip in 2012. Meanwhile, water right values in Washington, Utah, Texas, and Arizona have remained stable.

Market Outlook

The overall water market outlook greatly differs from the trends observed just a few years ago. WestWater Research Associate Matt Payne is bullish on water rights, commenting that “after two consecutive years of decline, stable water right prices from 2011 through 2012 may suggest that these markets are beginning to turn around. We expect that water right values will start to increase in the coming months with the recovery of the regional economy.”

In addition to economic recovery, other factors are changing the water market landscape. For example, with current high agricultural commodity prices, farmers are competing with urban and environmental buyers to acquire water rights in some regions.

Water Rights Price Index

This Water Rights Price Index (WRPIx) relied upon a comprehensive database of over 15,000 water market transactions called WaterlitixTM. WaterlitixTM is a proprietary database maintained by WestWater Research LLC, a national consulting firm committed to simplifying the complex business of water markets through Transaction Advisory Service, Asset Valuations, and Market Analysis.

More detailed market information and historical WRPIx data can be accessed through WestWater’s new blog, the Water Market Insider. The Water Market Insider is the only publication of its kind — providing quarterly price and trading coverage on the primary U.S. water markets. Readers can access the Water Market Insider by following this link.

For additional information, please contact:

Matt Payne
Associate
WestWater Research
Payne(at)waterexchange(dot)com
602-595-7009

Clay Landry
Managing Director
WestWater Research
Landry(at)waterexchange(dot)com
208-433-0255

WestWater Research - We Understand the Value of Water
WestWater Research’s proprietary database – WaterlitixTM – is the largest and most comprehensive pricing source for water transactions. Through WaterlitixTM, WestWater keep clients ahead of the curve with accurate information on market trends and prices. WestWater’s valuation analyses assist clients that are buying and selling water rights and other water assets through comprehensive financial and economic analysis of water markets on a regional and local level. By combining extensive deal experience with strong market knowledge, WestWater creates value for clients through innovative and unique deal structures.

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