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Average prices of CBT units continued their upward trend in the third quarter to about $24,300/unit—from nearly $22,500/unit in the second quarter this year. Average prices ranged from $23,779/unit to $24,984/unit. Sellers have been asking for prices as high $25,000/unit—and five transactions closed at that level during the third quarter.
The volume traded dipped during the third quarter—with 653 units trading. Monthly volumes ranged from 10 units to 355 units. During the second quarter, monthly activity ranged from 80 units to 448 units, and in the third quarter last year, the volume ranged from 196 units to 1,352 units.
Each unit represents 1/310,000 of the project’s supply—but the quantity of water represented by a unit varies each year according to 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 continue to tighten and prices continue to rise.
Written by Marta L. Weismann
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