When Underwater Lots
Sold in Florida Boom

Gertrude Shelby asked her readers a question in a 1926 issue of Harper's magazine: "Did you ever keep chickens?"

Ms. Shelby, a journalist, was using a metaphor to explain the rapid inflation of property prices in Florida. "Put down a pan full of big scraps, and the hens come running. The first ones grab big pieces and depart rapidly. ... The others see the pieces in the beaks, and instead of realizing there's plenty more in the pan, they chase the hens who got the first pieces. That's resale psychology."

In less than a decade, that psychology transformed Florida from an overgrown bog to the epicenter of get-rich-quick schemes. Debarking from a train in Miami in 1925, an English tourist remarked on the city's "tropical bedlam," where sales agents pounced on visitors with noisy promises of "unsurpassed fortune."

"One had been prepared for real-estate madness," the Englishman wrote. "And here it was, in excelsis."

The Florida boom of the 1920s was far from America's first land rush, but it was certainly one of its most colorful, thanks to visionaries and hucksters like George Merrick, Carl Fisher and D.P. Davis. When Mr. Davis's first two island developments near Tampa went on the market in October 1924, people lined up for 40 hours before the sale began. One man chained himself to the door so he wouldn't lose his place. Not only did the entire 875 acres, much of it still underwater, sell out for $18 million, but an additional $8.2 million was returned to eager buyers whose money had arrived too late.

With World War I over, and Calvin Coolidge, the preacher of prosperity, in the White House, ordinary working Americans in 1924 were feeling optimistic and flush. Cars were beginning to become more affordable, and highways were reaching regions largely inaccessible until then. And Florida, like Southern California, had something people from the North and Midwest were willing to pay for: balmy winter weather.

A few foresighted developers already had started converting Florida's climate into cash. But first they had to clear the dense vegetation; drain, dredge, blast and fill; pour concrete; pump sand onto the waterfront; and import flamingos and date palms. They changed the name of Bull Island to Belle Island; Mosquito Inlet was renamed Ponce de Leon Inlet. George Merrick dreamed up a model city called Coral Gables, "wherein nothing would be unlovely."

Carl Fisher took one look at a mangrove stand and imagined Miami Beach. With the extension of the rail line to Miami, some pockets of Florida began to serve as winter playgrounds for the very wealthy.

World War I briefly interrupted the state's budding development, but soon after it ended, stories of the "American Riviera" and its skyrocketing property values began drifting north, assisted by a determined campaign of boosterism. "The only man that doesn't make money in Florida real estate is the man that doesn't own any," one slogan went. George Merrick hired William Jennings Bryan, former presidential candidate, to exhort the virtues of buying Coral Gables property twice a day to visitors. "Miami is the only city in the world," Mr. Bryan said, "where you can tell a lie at breakfast that will come true by evening."

Even Florida's government did its part to attract investors. In 1924, it amended its constitution to abolish income and inheritance taxes. Nor did Florida require motorists to have drivers' licenses. Its 45 mph speed limit was the highest in the nation. And the state's proximity to Cuba and the Bahamas guaranteed that Prohibition wouldn't kill the fun.

By 1925, the entire state had become one big commodity pit, with hundreds of thousands of visitors using a 10% "binder" to buy lots they intended to sell, at a profit, long before the other 90% was due. Some lots went through a dozen hands before the contract settled.

The first generation of Florida buyers, like early converts to many speculative frenzies, did very well. A piece of land in Palm Beach that sold for $84,000 in 1915 was assessed 10 years later at almost $5 million. But as the prices inflated, so did the promises. A subdivision called Manhattan Estates was promoted as "not more than three-fourths of a mile from the prosperous and fast-growing city of Nettie."

Nettie did not yet exist.

People bought lots sight unseen -- a blueprint stamped "Sold" was more valuable than dollars. In the summer of 1925, people began putting "Not For Sale" signs in front of properties they intended to keep.

Before long, however, Florida began to choke on its own growth. In 1925, more than 2,000 freight cars were waiting to be unloaded in Miami. In August, the single railroad operating to Florida announced it could accept no more freight except fuel, livestock and perishables. Stocks of building materials soon ran out. Then, "two hurricanes showed what a soothing tropic wind could do when it got a running start from the West Indies," as Frederick Lewis Allen put it in his history of the 1920s, "Only Yesterday."

By 1927, those who still had money to gamble left Florida for a safer game: the stock market.

Email your comments to rjeditor@dowjones.com.