Posted July 16, 2008
the prices were so inflated that to buy a
condo-style property in 1926, you would've had to pay the same as you would now
have to pay for a luxury home in the guard-gated communities in Miami
($4,500,000) - without adjusting for inflation! In other words, those that
bought property in 1926 had to wait until the 21st century before they could
The 1920’s, in America,
were a time of great prosperity. Skilled and educated working Americans had jobs
providing numerous fringe benefits, paid vacations and pensions. In addition,
automobiles were becoming commonplace for the wealthy and middle class allowing
cross country travel. This good fortune set the stage for the Florida real
Starting in 1920, many
Americans became enamored by the materialistic and prosperous lifestyle of the
time. During this time, the stock market was moving forward at an extremely fast
pace. Many investors were becoming quite wealthy. Florida became a hot spot for
these newly rich people, who didn’t enjoy the cold. Many whole families took
vacations to Florida. It was at this point that tourism started booming and land
prices were skyrocketing. Many astute investors took notice and started buying
Florida real estate. The population in Florida was growing exponentially and
housing couldn’t meet the demand. Florida became the “playground of the rich and
famous”. Illegal casinos and drinking parlors became widespread in Miami.
At this point, almost
anybody could invest in Florida, even without much money. Credit was plentiful
and soon 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 as a
result of its humongous real estate advertisements. People in the North heard
about the real estate prices “doubling and tripling”, causing a snowball effect.
Capital was rapidly pumped into the real estate market. Whole golf communities
were developed, such as Temple Terrace. Resorts and retirement communities were
developed almost overnight. Mansions were sprawling in every area, as were
swimming pools. As always, waterfront property was the most desirable. Florida
was seen as a veritable Utopia.
Real estate prices
quadrupled in less than one year. An elderly man invested $1,700 in property and
by 1925 the property was worth over $300,000! It seemed you could do no wrong by
just buying any property in Florida and become a millionaire.
could be bought for $800,000 could, within a year, be resold for $4 million
before crashing back down to pre-boom levels. The prices were so inflated
that to buy a condo-style property in 1926, you would've had to pay the same as
you would now have to pay for a luxury home in the guard-gated communities in
Miami ($4,500,000) - without adjusting for inflation!
1925, real estate prices had become so exorbitant that buying land wasn’t
affordable any longer. New investors failed to arrive and old investors started
to sell. Panic arrived, as it always does, and the real estate market crashed.
Prices kept moving downwards as heavily indebted investors tried to sell to
bankruptcy. In most cases, no buyers arrived, and the investors were
bankrupt from the enormous mortgages.
Market crashes always
occur in the same manner. Regardless of the market, the same simple
psychological underpinnings are always at work. People who are caught up in a
bubble never look back for historical examples. For this folly, they become
“Those who cannot
remember the past are condemned to repeat it.”
>back to real estate
Goldonomic, Florida, USA -