Florida land boom of the 1920s facts for kids
The Florida land boom of the 1920s was Florida's first real estate bubble. This pioneering era of Florida land speculation lasted from 1924 to 1926 and attracted investors from all over the nation. The land boom left behind entirely new, planned developments incorporated into towns and cities. Major investors and speculators such as Carl G. Fisher also left behind a new history of racially deed restricted properties that segregated cities for decades. Among those cities at the center of this bubble were Miami Beach, Coral Gables, Hialeah, Miami Springs, Opa-locka, Miami Shores, and Hollywood. It also left behind the remains of failed development projects such as Aladdin City in south Miami-Dade County, Fulford-by-the-Sea in what is now North Miami Beach, Miami's Isola di Lolando in north Biscayne Bay, Boca Raton, as it had originally been planned, Okeelanta in western Palm Beach County, and Palm Beach Ocean just north of the Town of Palm Beach. The land boom shaped Florida's future for decades and created entire new cities out of the Everglades land that remain today. The story includes many parallels to the real estate boom of the 2000s, including the forces of outside speculators, easy credit access for buyers, and rapidly appreciating property values, ending in a financial collapse that ruined thousands of investors and property owners, and crippled the local economy for years thereafter.
Background and history
In the background were the well-publicized extensions of the Florida East Coast Railway, first to West Palm Beach (1894), then Miami (1896), and finally Key West, 1912. The Everglades were being drained, creating new dry land. Finally, World War I cut off the rich from their seasons on the French Riviera, increasing the appeal of parts of the U.S. with a Mediterranean or Tropical climate.
The economic prosperity of the 1920s coupled with a lack of knowledge about storm frequency and the poor building standards used by boom developers set the conditions for the first 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 publicity stunts and dead restrictions, developers saw a large influx of Northern tourists and potential residents. Notorious developer Carl G. Fisher of Indiana became famous by purchasing a huge lighted billboard in New York's Times Square proclaiming "It's June In Miami". Fisher's publicity and investments along with those of concurrent pioneers Lummus and Collins correlated with rapidly rising prices, and the boom began. Brokers and dealers speculated wildly on commodities as well. They ordered supplies in excess of what was actually needed and sent shipments to general destinations. The result was railroad freight cars became stranded, choking the movement of rail traffic statewide.
The impact of the boom would extend beyond Miami and southern Florida. Tampa would also see growth during this period as well, but would have a more diversified economy than Miami that included manufacturing and tourism. Miami's economy was primarily based on tourism despite failed attempts during the 1920s to diversify the city economically. Jacksonville, the largest city in Florida, would not be as affected by the boom because municipal leaders had decided to work on expanding industry and commerce rather than tourism after World War 1.
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 real land value. The Internal Revenue Service 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. To make matters worse, in October 1925, the "Big Three" railroad companies operating in Florida—the Seaboard Air Line Railway, the Florida East Coast Railway, and the Atlantic Coast Line Railroad—called an embargo due to the rail traffic gridlock of building materials, permitting only foodstuffs, fuel, perishables, and essential commodities to enter or move within the state.
Then, on January 10, 1926, the Prinz Valdemar, a 241-foot, steel-hulled schooner, sank in the mouth of the turning basin of Miami harbor and blocked access to the harbor. It had been on its way to becoming a floating hotel.
Because the railroads were still embargoing non-essential shipments, it now became completely impossible to bring building supplies into the Miami area, and 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 many people from huge possible losses 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." 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.
End of the boom
Although the railroads lifted the embargo in May 1926, the boom was about to end. The 1926 Miami hurricane ended the boom and the much smaller 1928 Okeechobee hurricane made certain it was extinguished. The 1926 hurricane destroyed "whatever public enthusiasm for Florida vacation properties and real estate development that remained," as there was little preparation for the storm.
Florida's economic decline predated the start of the Great Depression. Therefore, it had fewer resources and more debt "than other regions of the nation." Large amounts of local debt financing through bonds worsened the economic situation in the state with most of it coming from the years of the land boom. During the land boom, many local governments sold bonds to pay for projects related to development. After the boom, local government did not have revenue proceeds to pay down bond debt. This resulted in widespread unsecured bond default.
Deposits in Florida banks had increased steadily between 1922 to 1925, but then started to decline; by 1926 smaller banks began to fail because of many withdrawals by depositors and defaults on loans. Bank assets flowing into the state started to reverse. A "surplus of funds" and easily available credit also began to dry up.
See also
In Spanish: Burbuja inmobiliaria de Florida en los años 1920 para niños
