The Florida land boom of the 1920s was Florida's first real estate bubble, copious land speculation and swindling, and hasty construction of flimsy homes and stores, that lasted from 1924 to 1926, attracting unwary investors from all over the nation. The land boom left behind entire new cities, such as 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.
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 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 such as 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", property prices rose rapidly on speculation and a land and development boom ensued. Brokers and dealers speculated wildly in all classes of commodities as well, ordering supplies vastly in excess of what was actually needed and even sending shipments to only a general destination, with the end result being that railroad freight cars became stranded in the state, choking the movement of rail traffic.
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.
Although the railroads lifted the embargo in May 1926, the boom nevertheless fizzled out. The scale of the boom and reporting from national news outlets about shady practices done would create concern. It would lead to the Florida Real Estate Commission, association of real estate boards along with the National Better Business Bureau doing investigations. In the summer of 1925, investor concerns about tax liability and increased "internal revenue scrutiny" would calm down investors. Two hurricanes, one in 1926 and another in 1928 would help to further contribute to its demise. When the 1926 hurricane hit, it would end up destroying "whatever public enthusiasm for Florida vacation properties and real estate development that remained." as there was little preparation for the storm.
Florida's negative economic decline would end up predating the start of the Great Depression. However, it would have less resources and more debts "than other regions of the nation". Large amounts of local debt stemming from bonds that were issued 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 would sell bonds to pay for projects related to development then but after the boom it would be hard to retire the debts and defaulting on these bonds would be widespread.
Deposits in banks located in Florida which had increased steadily between 1922 to 1925 would start to decline and by 1926 smaller banks would start to fail because of defaulting on loans and withdrawals being done. Assets from banks flowing into the state would start to reverse. A "surplus of funds" and easily available credit would also start to dry up.
8. “Bubble in the Sun-the Florida boom of the 1920’s and how it brought on the Great Depression” By Christopher Knowlton. Simon and Schuster, 2020