A new economic report released today by Protect the Flows, a coalition of more than 850 businesses that depend on a healthy Colorado River, reveals that river-based real estate values have the potential to plummet by nearly 10% if the Colorado River Basin flow levels drop significantly as predicted by the Department of the Interior’s Colorado River Basin Water Supply & Demand Study.

The findings come from a survey of real estate professionals in Sedona; Aspen and Grand County, Colo; and Farmington, N.M., conducted by leading natural resource economics firm Southwick Associates, Inc.

The report contains data that directly bears on any discussion about managing the Colorado River. In particular, the U.S. Senate will hold an important Energy and Natural Resources Water and Power Subcommittee oversight hearing on July 16 to examine the basin study projections and consider ways to deal with the current and future supply and demand imbalances predicted.

“Water drives real estate values more than any other aspect in Grand County. Loss of flow will decrease values for every property,” said Dennis Saffell, real estate broker and land consultant in Winter Park, Colo.

Realtors in the four communities within the Colorado River Basin were asked to provide current value for a hypothetical single-family home (2,000 SF, 3 bedrooms, 2 baths and 2 car garage on ¼ acre of land) in their community with riverfront, river view and no access or view of the river.

They were then asked to predict changes to the property value if stream flows were to decline byapproximately 20 percent below current average levels, the amount by which scientists predict the Colorado River’s flow will decline by 2060 as a result of climate change and shifting supplies and demands for water.

The estimates from real estate professionals revealed as one would suspect that riverfront and river view homes provided a price premium in river-based communities. But more than that, the value of those types of properties could drop significantly if water levels decline. For example, in Grand County where it is predicted that riverfront housing would drop by 16%, the sales price of $574,000 for a hypothetical riverfront home is projected to decrease by $92,000.

“These property value findings relating to the projected river flow declines will be very instructive for the Department of the Interior and the Senate in the coming months as they assess the best water management policies,” said Molly Mugglestone, Protect the Flows Co-Director.

“The report directly connects diminishing river flows with a substantial loss of real estate value. Any meaningful state or federal discussion about the economic impact of water levels in the Colorado River System should take into account this economic impact to rural communities.”

On May 28, the Bureau of Reclamation announced plans to take next steps to remedy the severe water supply and demand imbalances predicted in the three year basin study. Anne Castle, the assistant Interior secretary for water and science, emphatically stated that the report and its “call to action” cannot become “a study that just sits on a shelf.”

Additionally in May, Colorado Gov. John Hickenlooper issued an executive order instructing state agencies to begin work on a new “Colorado Water Plan” that would best serve urban and rural demands. A concerned Utah Gov. Gary Herbert has also initiated a process to explore new solutions to help the state face and manage diminishing water supplies. Both plans under development should benefit from incorporating this new economic data.

“What this study shows is that healthy rivers are pivotal to economic prosperity for nearby communities,” said Tom Allen, Director of Research for Southwick Associates, Inc. “Anything that degrades the quality of local rivers and creeks can have a harsh impact on real estate markets in river-dependent communities and seriously limit future economic growth.”

Fortunately, there is a path to modernize the management of the Colorado River system in a way that mitigates the declining river flows and protects rural economies across the southwest. The cost-effective measureslaid out in the Colorado River Basin Study would bring supply and demand on the river system’s water back into balance and should be implemented immediately. These measures include:

>> Improving water conservation and re-use in urban areas;

>> Implementing technology and practices on farms that yield greater water efficiency;

>> Instituting flexible water sharing arrangements that match water supply to emerging demand.

The National Association of Realtors’ 2013 Profile of Buyers’ Home Feature Preferences supports the Southwick report on the relationship of water levels to property values, recognizing that homes on or near water are important features driving real estate values.

The Profile shows that buyers placed the highest dollar value on waterfront properties and homes that are less than 5 years old, with 32% of buyers willing to pay a median of $5,420 more for a comparable home on the waterfront.