The Father of Waters

While Meade and Lee clashed at Gettysburg, Grant was tightening his noose around Vicksburg, the Mississippi River fortress city.  Confederate General Pemberton and 30,000 rebels had been under siege for months.  To escape Union artillery, residents had moved out of the city and into burrows and caves dug into hillsides.  Visitors said some looked not much different than your living room, except in a big gopher hole.

Situated high above a bend in the Mississippi, and protected by marshes, Vicksburg was the last major Confederate stronghold on the river.  By holding it, and the threat of its huge guns aimed at Union ships, the Confederacy prevented the Union from controlling the river.  New Orleans had been in Union hands since early in the war, and upriver the forts had been subdued by Grant in early 1862.  Just above New Orleans, Port Hudson continued to harass and damage Union gunboats.

But as June ended, Vicksburg's fate looked inevitable.  There was no way to break out, ammunition was low, food was scarce, and Union troops kept moving closer with each passing week.  On July 4, one day after Lee's defeat at Gettysburg, the Vicksburg garrison and city surrendered to Grant.  A fine Independence Day gift to President Lincoln.

Five days later, hearing that Vicksburg had surrendered, Port Hudson's commander Gen. Gardner surrendered too.  From this date to the end of the war, the Union controlled the Mississippi for its entire course.  The Confederacy was split, isolating Texas, Arkansas and Louisiana from the other 8 rebel states. 

Lincoln's announcement of Union success was characteristically biblical in tone: "The father of waters once again flows unvexed to the sea."  (compare that eloquence to our politico crowd of today)
Grant would next move northeast to help the Union recover from the terrible loss at Chickamauga, and lead a Union victory at Chattanooga in the fall.  As 1863 ended, the war in the west was over, and Lincoln could concentrate his efforts on destroying the Army of Northern Virginia and Robert E. Lee.

Real Estate Recovery

For the first time since the real estate collapse, we have seen several indicators move up at the same time.  The most persuasive generally are the new building permits and the Case/Shiller index showing 19 of 20 markets moving up.  Mr. Shiller, who famously warned of a real estate bubble in 2004, was interviewed yesterday about his views on the index results.  He was notably cautious and said if the numbers continue to move up like this he will be optimistic.

We should respect his views and the authority with which he wields it (I know it's hard for you Harvard men and women to defer to an Eli from New Haven).  We have many indices to consult on home values, including FHFA tracking of 379 real estate markets.  In our business, we don't have the luxury of relying on national or regional trends.  We're focused on local influences, and fortunately there are tools to help there. 

Other factors constrain us - or at least add complexity.  For example, Millenials (those born after 1982) prefer renting.  The rental market, even for single family homes, is hot with prices rising and supply short in most places.  We have to factor rental market influences both as a preferred lifestyle alternative, and on how they affect home sales.  Some have told me they wish appraisers had paid more attention to the rental v. home price gap in markets like Miami prior to 2008, and that we should take a lesson from that experience. 

We also have to keep in mind that millions of foreclosures, delayed due to several influences, are once again entering the pipeline.  Since about a third of these are suburban homes, be on the lookout for activity and concentrations in markets your clients move people into and out of.  There is good data on this activity from several government websites, and from RealtyTrac.

All in all, despite the fits and starts of past predictions that recovery was underway, my view is that we are in a slow climb nearly everywhere.  Except for local influences that might bring a market down (a plant closing, base closing, storm impact), we should see continuing modest improvement.  As I wrote in early 2009, the Fed will continue to keep rates low and mortgage rates will be at or near historic lows for a long time to come. 

I'd like to hear your views.