The Florida Land Boom of the 1920s

Joe Weisenthal lists a number of the most amazing bubbles in history. I’ll add one more to the list — the great Florida real estate boom of the 1920s. Here’s a description of the madness from Wikipedia.

By the 1920s, its economic prosperity had set the conditions for a real estate bubble in Florida. Miami had an image as a tropical paradise and outside investors across the United States began taking an interest in Miami real estate. Due in part to the publicity talents of audacious developers like Carl G. Fisher of Miami Beach, famous for purchasing a huge lighted billboard in New York‘s Times Square proclaiming “It’s June In Miami”,[1] property prices rose rapidly on speculation and a land and development boom ensued.[2] By January 1925, investors were beginning to read negative press about Florida investments. Forbes magazine warned that Florida land prices were based solely upon the expectation of finding a customer, not upon any reality of land value.[3] New York bankers[who?] and the IRS both began to scrutinize the Florida real estate boom as a giant sham operation. Speculators intent on flipping properties at huge profits began to have a difficult time finding new buyers. The inevitable bursting of the real estate bubble had begun.

On January 10, 1926, the Prinz Valdemar, a 241-foot, steel-hulled schooner, sank in the mouth of the turning basin of Miami harbor. The old Danish warship had been on its way to becoming a floating hotel.[4]

The Prinz Valdemar, capsized and blocked the port of Miami for several weeks in January of 1926, helping to usher in the end of the real estate boom. Florida Photographic Collection

The railroads, already strained by the burden of transporting both food and building supplies, had already begun raising shipping rates. When the sea route to Miami was blocked the city’s image as a tropical paradise began to crumble. In his book Miami Millions, Kenneth Ballinger wrote that the Prinz Valdemar capsize incident saved a lot of people a lot of money by revealing cracks in the Miami façade. “In the enforced lull which accompanied the efforts to unstopper the Miami Harbor,” he wrote, “many a shipper in the North and many a builder in the South got a better grasp of what was actually taking place here.”[5]

In October 1925, in an effort to improve Florida’s clogged rail system, the railroad companies placed an embargo on all railway goods other than food, which further contributed to Florida’s skyrocketing cost of living.[citation needed] New buyers failed to arrive, and the property price escalation that fueled the land boom stopped. The days of Miami properties being bought and sold at auction as many as ten times in one day were over. The first Florida real estate bubble had burst.

The land boom was also part of the story of the Marx Brothers first movie, The Cocoanuts.

Posted by on November 18th, 2009 at 2:53 pm


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