Think the housing crisis was bad? The 1920s were worse
WEST PALM BEACH, Fla. – April 19, 2019 – Question: Who were the 'Binder Boys' and how did they change South Florida?
Answer: Boom. Frenzy. Free-for-all. Pick your metaphor. None come close to the madness that was Florida's 1920s real estate boom.
With World War I over and prosperity spreading, with the railroads bringing investors literally by the trainload, with car ownership and road construction growing exponentially, and with enforcement of Prohibition all but a joke, the hottest investment in America was a place that had gone from a worthless swamp to "America's Riviera."
On a famously fat July 26, 1925, the Miami News comprised a staggering 504 pages, most of it real estate ads. It weighed 7-1/2 pounds.
Much of the real estate craze occurred in South Florida, but other parts of the state exploded as well. Between 1910 and 1930, Florida's population increased by half, from 752,619 to nearly a million and a half. A Daytona Beach-area sales manager crowed that "The Sunshine State is now entering upon the most extraordinary era of substantial growth and business activity ever known in the history of the world."
Opportunists called "binder boys" poured in – an estimated 25,000 of them in Miami alone. They crammed into hotel rooms and spent their days working the sidewalks, making fortunes by buying and selling property they never saw while having to put down only a 10 percent deposit: the "binder."
Sometimes the same parcel would be bought and sold several times as it worked its way down the sidewalk to be clocked in at the courthouse. And each time, the selling price naturally rose. Soon the lots were worth far more than what they reasonably should have been appraised.
These days, we call that a pyramid scheme. And like pretty much every one of those, this one collapsed.
How did it collapse? First, people decided they were tired of buying and selling and wanted to build. That's when they learned a lot of their property was under water or inaccessible.
Then they learned that while Florida was rich in natural resources, factories that turned timber into 2-by-4s, or made penny nails or bricks, were up north, and the transportation system of the 1920s, while on the move, still was downright medieval compared to today's land, sea and air options. People couldn't get building materials down fast enough.
On top of that, the law was catching up with the con artists and the taxmen with the speculators. And the nation's stock market was getting sick. Really sick.
Northern bankers, investors and chambers of commerce, watching their money exit, retaliated against Florida with negative campaigns that pointed out swindles or gouging or little weather problems called hurricanes.
In fact, three of the four most profound hurricanes to strike the southern half of Florida hit just nine years apart: the 1926 Miami storm, the 1928 Okeechobee hurricane and the 1935 Labor Day storm in the Keys.
Nervous speculators, in a bit of self-fulfilling prophecy, began to take their money and run. Demand began to drop. And when you're selling confidence and the confidence departs, it's all over. As St. Petersburg developer Walter Fuller said, "we just ran out of suckers."
Scholars opined that such unbridled capitalism, and resulting collapse, would never be repeated – until, about 90 years later, it was.
Copyright © 2019 The Palm Beach Post (West Palm Beach, Fla.), Eliot Kleinberg. Distributed by Tribune Content Agency, LLC. Eliot Kleinberg is a staff writer for the past three decades at The Palm Beach Post in West Palm Beach, and the author of 10 books about Florida.
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