1. Market Crashes: Introduction
  2. Market Crashes: What are Crashes and Bubbles?
  3. Market Crashes: The Tulip and Bulb Craze
  4. Market Crashes: The South Sea Bubble
  5. Market Crashes: The Florida Real Estate Craze
  6. Market Crashes: The Great Depression (1929)
  7. Market Crashes: The Crash of 1987
  8. Market Crashes: The Asian Crisis
  9. Market Crashes: The Dotcom Crash
  10. Market Crashes: Housing Bubble and Credit Crisis (2007-2009)
  11. Market Crashes: Conclusion

By Andrew Beattie

When: 1926
Where: Florida

The amount the market declined from peak to bottom: Land that 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!

Synopsis: In the 1920s, the United States of America was chugging along like the British Empire of the 1700s, and it was only natural that people were beginning to believe such prosperity was infinite. But it wasn't the stock market that was the recipient of a bubble. It was the real estate market.

In 1920, Florida became the popular U.S. destination/residence for people who don't like the cold. The population was growing steadily and housing couldn't match the demand, causing prices to double and triple in some cases, which was not exactly unjustified at this point. But, news of anything doubling and tripling in price always attracts speculators. So, once people began pumping huge amounts of money into the real estate market it took off. Soon everyone in Florida was either a real estate investor or a real estate agent.

Unfortunately, the rules are the same whether you pay too much for a stock or for a piece of land: you have to make that much more to claim a profit. This did happen for awhile, and land prices quadrupled in less than a year. Eventually, however, there were no "greater fools" to buy the disgustingly overpriced land, and prices began to adjust ever so subtly. Speculators realized there was a limit to the boom, and began to sell their properties to solidify their profits while they could.

Then everybody simultaneously saw the writing on the wall, and panic selling ensued. With thousands of sellers and very few buyers, prices came down with a sickening thud, twitched a bit, and then crawled down even lower.


Market Crashes: The Great Depression (1929)
Related Articles
  1. Managing Wealth

    The Truth About Real Estate Prices

    Historical housing price data suggests ongoing increases in housing prices, but these numbers don't tell the whole truth.
  2. Investing

    How You Make Money In Real Estate

    If you're interested in the real estate game, make sure you know what factors will affect whether you make money or not.
  3. Investing

    Top 4 Things That Determine a Home's Value

    Your house depreciates over time, while the land beneath it is likely to do the opposite.
  4. Investing

    Is Now A Good Time To Invest In Real Estate?

    From carrying costs to investment risk, there's a lot to consider before you invest in real estate.
  5. Investing

    Can Real Estate Stabilize Your Portfolio?

    History suggests that real estate can provide diversification and a hedge against inflation.
  6. Financial Advisor

    How to Invest in Real Estate Without Buying Property

    Investing in real estate can require more capital than most investors have available, but there are options to invest in real estate for less.
Frequently Asked Questions
  1. Who are Whole Foods' (WFM) main competitors?

    Whole Foods' main competitors are Sprouts Farmers Markets and Trader Joe's. However, the recent acquisition by Amazon my ...
  2. What caused the Stock Market Crash of 1929 that preceded the Great Depression?

    Find out what led to the stock market crash of 1929, which in turn led to the Great Depression. It sparked a nearly 90% loss ...
  3. How does inflation affect the exchange rate between two nations?

    Inflation is closely related to interest rates, which can influence exchange rates. Countries attempt to balance interest ...
  4. What are some examples of free market economies?

    In a free market economy, the law of supply and demand, rather than a central government, regulates production and labor. ...
Trading Center