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Page 6 “Thank You For Reading Trader Jakes”

THE FORGOTTEN REAL ESTATE BOOM OF THE 1920’s

The famous stock market bubble of 1925–1929 has been closely

analyzed. Less well known, and far less well documented, is the

nationwide real estate bubble that began around 1921 and deflated

around 1926. In the midst of our current subprime mortgage col-

lapse, economists and historians interested in the role of real estate

markets in past financial crises are re-examining the relationship

of the first asset-price bubble of the 1920s with the later stock mar-

ket bubble and the Great Depression that followed. Limited data on

1920s home prices and foreclosures means that many questions

remain unanswered.22 Historical trade publications like the weekly

New York Real Estate Record and Builder’s Guide, of which Baker

Library holds a sixty-year run, allow researchers to fill in the blanks.

The implications of early findings may challenge conventional wis-

dom about the factors that caused and prolonged the Great

Depression.

In the 1920s, Florida was the site of a real estate bubble fueled by

easy credit and advertisers promoting a lifestyle of sunshine and

leisure. Contemporary accounts describe a collective madness that

consumed Florida investors: city lots in Miami were bought and sold

as many as ten times in a single day. The received wisdom holds

that a 1926 hurricane pricked the bubble, but house price indices

and construction data suggests that the boom and bust was in fact

a nationwide phenomenon whose causes and consequences

remain unclear.

The housing price downturn in 1926 led to a rise in the foreclosure

rate. Foreclosures were the cause of considerable hardship in the

1920s, but public attention focused on the plight of family farms,

not residential real estate. Heavily mortgaged during World War I, in

expectation of continued high prices, many farms were over-

whelmed by the postwar collapse of the agricultural commodities

market. Yet foreclosures of residential properties also increased in

1926, rising steadily through the stock market bubble and peaking

in 1933.

THE GREAT FLORIDA LAND BUST

In 1925, the inevitable began to occur in the real estate industry.

Land prices had reached such a zenith that new customers failed

to arrive and old customers began to sell their land. Suddenly, the

only market for Florida land was for selling land.

The larger cities of Florida felt the impact first. They had borrowed

heavily to finance new road and public service construction and uti-

lized sales taxes and land fees to pay their debts. Now the Yankee

dollars were vanishing. St. Petersburg was the most indebted per

citizen town in the United States. Key West ranked second.

Caught without customers, many realtors folded up business, send-

ing their binder boys home. One clever Pinellas realtor found a way

to send his binders back up North without personal cost. He con-

tracted with a funeral company that by law had to escort the bodies

of deceased retirees to Northern cemeteries. Instead of funeral

employees, the realtor and funeral director cashed in the two-way

tickets for one-way tickets and placed binder boys on the trains as

escorts.

THE HURRICANE OF 1926

The news of the Florida Land Bust crippled the tourist market.

Despite the continued boom in the United States Stock Market, peo-

ple no longer trusted buying Florida land. And yet, the land was

merely

overpriced.As

if the land collapse was not bad enough, a ter-

rible hurricane hit South Florida in September of 1926 with winds

in excess of 125 miles per hour. Traveling parallel to the Atlantic

Ocean, the storm suddenly turned west across Palm Beach County

into the heartland of the muck lands.The migrant workers and small

farmers of Lake Okeechobee were asleep. Few had radios.They had

no automobiles for a quick escape. As the winds of the hurricane

moved counterclockwise across the lake, the south end of the lake

was dried up. When the storm passed by, however, a huge tidal

wave crashed down on the people of Belle Glade and Moore Haven.

The hurricane was an unwelcome coup de grace to the Florida Land

Bust. Over 13,000 homes were destroyed. 115 were dead in Miami

and the tidal wave had drowned 300 people. The news of people

drowning in a wave, thirty miles from the Atlantic Ocean amazed

people across the world. The nameless migrants were piled up and

burnt to prevent plague. The major developments were in ruins,

many of them unable to recover. It would take years to rebuild the

confidence and spirit of the Florida Land Boom. When the Great

Depression hit Florida, it had a limited impact since so many

Floridians were already in weak financial state. A year later the

arrival of the Mediterranean fruit fly would hurt the citrus industry.

Certainly, many Floridians wondered if Florida would ever see again

such wonderful and confident times as the Florida Land Boom.