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Average prices of CBT units have continued the upward trend in the first quarter, increasing from around $19,000/unit in the fourth quarter of 2013 to almost $19,500/unit in the first quarter this year. Average prices ranged from $18,500/unit to $19,677/unit. Sellers are now asking for prices as high $22,000/unit—but no one reported closing a deal at that level in the first quarter.
The volume traded during the first quarter was down—with 156 units trading. Monthly volumes ranged from 14 units to 117 units. During the fourth quarter 2013, monthly activity ranged from 102 units to 455 units, and in the first quarter last year, the volume ranged from 12 units to 156 units.
Each unit represents 1/310,000 of the projects supply—but the quantity of water represented by the unit varies each year according the annual quota set by the Northern Water board of directors. The annual quota has a historic average of 74% (0.74 AF/unit). For 2014, the annual quota is 60%, after being raised in April from an initial quota of 50%.
While past drought conditions and uncertainty over water supplies may be playing a role in the price run-up, local water brokers see a pick-up in development and a shift in the demographics of who owns CBT units as the primary drivers. When the CBT project began operating in 1957, 85% of the units were owned by agricultural water users. Now agricultural users own only about 1/3 of the units. In addition, there are now fewer and larger agricultural operations—so the supply is limited to stronger hands that generally do not sell, except for estate settlements and retirement.
If the local water brokers are right, then expect to see the market tighten and prices continue to rise.
Written by Marta Weismann
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