By the 1920s, its economic prosperity had 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 like 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.
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 reality of land value. New York bankers and the IRS both 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. The inevitable bursting of the real estate bubble had begun.
On January 10, 1926, the Prinz Valdemar, a 241-foot, steel-hulled schooner, sank in the mouth of the turning basin of Miami harbor. The old Danish warship had been on its way to becoming a floating hotel.
The railroads, already strained by the burden of transporting both food and building supplies, had already begun raising shipping rates. When the sea route to Miami was blocked 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 a lot of people a lot of money 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.
In October 1925, in an effort to improve Florida's clogged rail system, the railroad companies placed an embargo on all railway goods other than food, which further contributed to Florida's skyrocketing cost of living. 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. The first Florida real estate bubble had burst.
The next year brought the 1926 Miami Hurricane, which drove audacious Biscayne Bay development projects such as Isola di Lolando into bankruptcy. The 1928 Okeechobee Hurricane and the Wall Street Crash of 1929 continued the catastrophic downward economic trend, and the Florida land boom was officially over as the Great Depression began. The depression and the devastating arrival of the Mediterranean fruit fly a year later destroyed both the tourist and citrus industries upon which Florida depended. In a few short years, an idyllic tropical paradise had been transformed into a bleak, humid remote area with few economic prospects. Florida's economy would not recover until World War II.
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