The Real Florida Real Estate Collapse – 1920’s Style
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“Those who do not learn from history are doomed to repeat it”
These are words many in Florida are saying about the real estate slowdown. However, the reality is that any problems we have in Florida are minor compared to those experienced in Florida’s first great land rush in the 1920’s.
Then speculation was rampant, but there were not boundaries in effect. What was traded was land, subdivisions were thrown up and cities went from a dirt road main street to all of the modern conveniences overnight with bond issuances to pay for them.
Now we are facing a different sort of downturn. Yes, there was rampant overbuilding in the condo market. However in the free standing homes much of the inventory was pre-existing and upgraded as part of the sales process. Back in the 1920’s the market was pure speculation.
The rampant speculation that fed the market then, however, was much different from today’s “flipping” – buying a property, fixing it up to increase its market value and then selling at a higher price. In fact, property improvement in many cases didn’t even enter into the equation.
By the height of the 1920s land boom, a single piece of land was changing hands as many as six times a day. “Binder boys” sold land for a small down payment, the understanding being that the land would probably sell at a higher price before the next payment came due. There always seemed to be another buyer hoping to jump in the market, causing the prices to skyrocket.
“Clearly the practice fostered a far greater turnover of parcels, significantly expanding the volume of transactions taking place and further charging the atmosphere of rampant speculation,” Tracy Danese wrote in “Claude Pepper and Ed Ball: Politics, Purpose and Power.” via TheLedger.com.
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