The Florida Land Boom of the 1920s
There appears to have been little talk of single-family homes as speculative
investments until the second half of the twentieth century. A ProQuest News &
Newspapers search for home price reveals virtually no reference to the term in a
speculative context until then. In fact, the phrase home price had a different
meaning in past centuries, as in the home price of wheat, meaning the price of
wheat in the domestic market as opposed to in foreign markets. When the phrase
home price with its modern meaning was mentioned, it typically appeared in a
story about a rich person spending a lot on a home, as a sign of wealth, but with
no sense that the home was appreciating in value. For example, an 1889 article
in the St. Louis Post-Dispatch exclaimed:
Senator Sawyer, who has for years lived in the house which Jefferson Davis
occupied when he was here in Washington, has stopped paying rent and has
built a MAGNIFICENT BROWN STONE MANSION within a stone’s throw of Dupont
Circle. It is worth at least $80,000 and Sawyer’s millions will keep it in fine
style. There are fine houses all around it.3
There is reference to value as if it is unchanging, but no sense that the senator
might be making a speculative investment.
A ProQuest News & Newspapers search for price per acre shows a very
different pattern. The phrase peaked at the beginning of the twentieth century,
when it tended to refer to farmland as a speculative investment. The Florida land
boom of the mid-1920s gets many hits, but the phrase home price almost never
appears in those articles. During that widely discussed boom, an associated
narrative emphasized that the proliferation of motorcars was making Florida land
more easily accessible to northerners looking for winter homes. Given the rise of
the automobile, it is not surprising that the allegedly beautiful sites that were
selling out so fast were empty lots for building new homes. However, by 1926,
the Florida land boom had become a widely covered scandal, reported nationally.
Newspapers printed stories that promoters were selling undeveloped land
divided into home-size parcels, sight unseen, to northerners who would never in
their lifetimes see a town built near their isolated homes. These stories rendered
such sales of undeveloped land disreputable.
Land has always been only a small part of a home’s value. One estimate, by

Morris A. Davis and Jonathan Heathcote, suggests that the land’s value averaged
only 36% of the home’s total value from 1976 to 2006.4 We do not seem to have
data on the percentage of land value in home value for earlier years, except in
assessments for property tax, but presumably when the US population was more
rural, the percentage was even lower.5
In contrast to the Florida narrative, with its emphasis on land, investments in
homes historically have been viewed as investments in structures that depreciate
through weather and use, that require constant maintenance, and that go out of
style and get torn down eventually. We can understand why land itself with no
structure on it, at least during the Florida boom, seemed a more exciting
investment.
Traditionally, prices of new homes were widely thought to be dominated by
construction costs.6 In fact, it used to be conventional wisdom that home prices
closely tracked construction costs. A 1956 National Bureau of Economic
Research study noted some short-term movements in US home prices not
explained by construction costs between 1890 and 1934, but it concluded:
With regard to long-term movements, however, the construction cost index
conforms closely to the price index, corrected for depreciation.… For long-
term analysis the margin of error involved in using the cost index as an
approximation of a price index cannot be great.7
Because their construction cost index included only the prices of wages and
materials, but not the price of land, the NBER analysts were viewing
investments in homes as nothing more than holdings of depreciating structures,
wearing out through time and tending to go out of fashion. With such a narrative,
housing bubbles have little chance of getting started.