The Bubble In The Sun

PrintPrintEmailEmail

It was all too good to last. Here and there skeptics began to raise their voices. Walter J. Greenbaum, a Chicago investment banker, warned against “wildcat land speculation” in Florida, and the Massachusetts Savings Bank League cautioned depositors against withdrawing money to invest there. Walter C. Hill of the Atlanta Retail Credit Company predicted that it would all end in the winter of 1925-26. The alarm seemed especially severe in Ohio. State Commerce Director Cyrus Locher went to Florida to investigate. “When the boom has subsided, there will be headaches all over America,” he reported. “The rise in Florida will continue as long as northern money is sent to Florida, and the end will be that of every boom, where few prosper and many hold the bag at the end.” Ohio passed “blue sky” laws in 1925 forbidding certain firms to sell Florida property.

These doubts suddenly began to take their toll of confidence. It was calculated that within ten miles of Miami there were enough building lots on the market to provide sites for houses for two million people. The first hard sign that the boom was going sour came when a lot on Miami Beach, which had been sold for $50,000, brought only $25,000. Other clouds, too, began to appear in the sunny Florida skies. In the summer of 1925, a fire started by an electric hair curler burned down both the Breakers and the Palm Beach Hotel. Then, Flagler’s East Coast Line and the Seaboard found that their tracks had taken so much punishment from increased traffic due to the boom that urgent repairs were necessary at once. To make this possible, an embargo was declared in August, 1925, on all carload lots except fuel, petroleum, livestock, and perishable material. In September, a “less than carload lot” embargo went into effect.

The embargo had disastrous effects on the boom, leaving thousands of desperate builders with unfinished construction on their hands. (One frantic contractor smuggled in a carload of bricks buried in ice and labelled “lettuce.”) The only alternative was to bring in material by water, and scores of abandoned hulks were resurrected for the purpose. But in January, 1926, an old Danish training ship, the Prinz Valdemar , which was being renovated to serve as a floating cabaret in the Miami harbor, capsized in the middle of the channel, completely halting all inbound and outbound shipping for several weeks.

As though these problems were not enough, other developments cast further gloom. For one thing, federal income-tax troubles began to dog the speculators. The rumors of a tax reduction in 1926, and the report that a number of special revenue agents had been sent into Florida, led many speculators to hold up sales in order to postpone profits until January, 1926. In December, 1925, the Internal Revenue Service announced that all notes on real-estate transactions would be considered as cash received and that full tax payment was due on them. The National Better Business Bureau commenced an investigation of frauds in Florida real estate, and a stock market break in February and March of 1926 forced back to New York many businessmen who had gone to Florida to plunge.

Through Christmas week, 1925, Miami was able to disguise its nagging doubts behind a cheerful holiday mask. On Christmas Eve the New York Times reported that rents were coming down, but the planned festivities went on. In a joint statement the mayors of Miami, Miami Beach, Hialeah, and Coral Gables proclaimed the last day of 1925 and the first two days of 1926 “The Fiesta of the American Tropics,” a season “when Love, Good Fellowship, Merrymaking, and Wholesome Sport shall prevail throughout Our Domains.” They declared that “through our Streets and Avenues shall wind a glorious Pageantry of Sublime Beauty Depicting in Floral Loveliness the Blessing Bestowed upon us by Friendly Sun, Gracious Rain, and Soothing Tropic Wind.” But the market would no longer respond to this kind of ballyhoo. The new season saw real-estate prices breaking sharply as optimists whistled in the dark about “stabilization,” “levelling-off,” and “salutary readjustment.” On February 14, 1926, the New York Times reported a decided lull. By July, Stella Crossley wrote bluntly in The Nation: “The Florida boom has collapsed. The world’s greatest poker game, played with building lots instead of chips, is over. And the players are now cashing in or paying up.” The roads north, she said, were black with “a strangely quiet exodus.”

The coup de grâce to the boom was administered by a formidable tropical hurricane, with winds in excess of 128 miles an hour, which roared over the Gold Coast and the Everglades on September 18, 1926. The storm killed 115 people in the Miami area and another 300 in the village of Moore Haven when it was flooded by the waters of Lake Okeechobee. Miami Beach was entirely inundated, and at one point during the storm the ocean extended deep into Miami itself. Four thousand homes were destroyed and nine thousand more damaged in the area from Fort Lauderdale to Miami, with property losses in the Greater Miami area alone put at $76,000,000.

Yet the wreckage left by the hurricane was as nothing compared to the wreckage left by the collapse of the boom. On Singer’s Island, just north of Palm Beach, an unfinished hotel begun by Paris Singer became a luxurious resort for sea birds. In Miami, a hotel near the airport was transformed into a haven, not for snowbirds but for chickens. With property holders defaulting to creditors and to the tax collector, the only land-office business in Florida was being done in the courts.