By Jesse Colombo (This article was written on June 26th, 2012)
The Florida Real Estate Bubble was a speculative property bubble that occurred in Florida in the early and mid-1920s.
The 1920s in America were a time of peace and growing prosperity. Many skilled and educated Americans were employed in jobs that provided fringe benefits including paid vacations and pensions. In addition, automobile ownership was becoming increasingly commonplace for members of the affluent and middle classes, which led to a boom in cross-country travel as workers used their vacation time to visit various parts of the country by car.
During this time, the stock market was rising at an extremely fast pace and many investors were becoming quite well-off. Florida became a hotspot for a good portion of these newly rich people, especially for those who preferred warmer weather. As Florida became known as a “playground for the rich and famous,” illegal casinos and drinking parlors were cropping up throughout Miami.
Vacationing in Florida soon became a desirable past-time for America’s middle classes in addition to the affluent. It was at this point that Florida’s tourism industry began to boom, which caused land prices to rise. Astute investors took notice of Florida’s rising real estate prices and made strategic investments in local real estate. Florida’s population was soon growing exponentially and the state’s supply of houses could not satisfy the soaring demand. As Florida’s economy boomed, cheap credit became so plentiful that practically anyone could have invested in real estate, regardless of their net worth. At the peak of the mania, it seemed as if almost everybody in Florida was either a real estate investor or a real estate agent. In 1922, the Miami Herald became the heaviest newspaper in the world due to its incredible quantity of real estate advertisements.
When people in Northern states such as New York and Massachusetts heard about the “doubling and tripling” of Florida real estate prices, a snowball effect was created as more investors clamored for a piece of the action. Incredible quantities of capital were pumped into Florida’s real estate market and found its way into projects such as golf communities, resorts and retirement communities. Mansions with massive swimming pools were sprawling in practically every area. Unsurprisingly, waterfront property was the most desirable of all properties.
As the Florida real estate bubble crescendoed in 1925, property prices quadrupled in less than one year. Investors made incredible fortunes, such as an elderly man who invested $1,700 in a Florida property and watched its value soar to $300,000 in 1925. It seemed as if investors could do no wrong by simply buying any property in Florida and riding it to lofty heights. By 1925, Florida’s real estate prices had risen so high that they became very top-heavy. Soon after, prospective investors started to lose interest in Florida real estate and earlier investors started to sell their holdings to lock in their profits. Property prices fell under their own weight until the market began to panic, which caused Florida’s real estate market to crash. Prices plunged as heavily-indebted investors tried to liquidate their holdings to avoid going bankrupt. In many cases, no buyers appeared and Florida real estate investors went bankrupt under their crushing mortgage debt loads.
To make matters worse, an extremely destructive hurricane ravaged South Florida in September 1926 as 125 mile per hour winds practically turned Palm Beach County into swamplands again. After the storm, a powerful tidal wave crashed upon the towns of Belle Glade and Moore Haven. Over 13,000 homes were destroyed and 415 people died as a result of these horrific natural disasters. Additionally, the arrival of the Mediterranean fruit fly obliterated Florida’s economically-important citrus industry.
It took years for Florida to fully recover, even though the rest of the country was experienced its Roaring Twenties boom from 1925 to 1929. Due to its already poor financial state, Florida was barely affected by the stock market crash of 1929 and the ensuing Great Depression.
Other 1920s Florida Real Estate Bubble Resources: