Measuring Trends in Western Water Prices
Members of our team of water market professionals were recently published in the Journal of American Water Resources Association for their research on measuring trends in Western U.S. water prices. In this paper, our team develops a model that provides a measurement of water scarcity in the West.
Research Article Abstract
This study updates analysis of western water markets with data from thirteen river basins in eight states based on analysis of over 7,000 transactions from 2002 to 2019. We take a new approach to characterizing the time trend in prices across basins by estimating hedonic price indices. In doing so, we do not attempt to explain how prices are determined but rather to characterize general price movements across the region. There have been nine widely cited analyses of trends in western water rights prices and trading. Since 2010, when Stratecon ceased publishing the Water Strategist, no one has extended this time series until now (Stratecon Inc. Accessed January 25, 2021). Researchers, planners, and investors remain keenly interested in water markets, but limited historic data are available on general water right price trends and volatility. Understanding general price movements over time help to fill this gap. Our analysis confirms the findings of earlier studies that urban buyers systematically pay premium prices relative to agricultural or environmental buyers, and that prices vary significantly within basins, across basins and states, and over time. Results from the pooled-period method indicate an annual rate of appreciation of around 2.8% and results from the adjacent-period method indicate a rate of 5.1%. Both methods suggest that water right prices from 2002 to 2019 have increased at a rate similar to the general price level.