the great depression: a real estate boom gone bust -- 4/17/25

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Today's encore selection -- from A Brief History of Doom by Richard Vague. Contrary to the explanation found in many histories of the Great Depression, that calamity was a massive real estate boom gone bust. Residential construction more than tripled, and the housing boom was every bit as large as in the Great Recession on a per capita basis. In Manhattan, more skyscrapers were built in the late 1920s than during any other comparable span in its history, and the skylines of most major U.S. cities are still testimony to the excesses of that era:

"The Great Depression brought a level of misery rarely seen in American history ... [and] was a massive residential and commercial real estate crisis. The financial records of the 1920s, which have largely been overlooked, indelibly show this. During the 1920s, annual housing and commercial real estate construc­tion almost tripled -- and nearly all of it was financed by debt.

"This explosion in residential and commercial construction lending, aug­mented by lending for utilities and stock purchases, created the euphoria of the Roaring Twenties, the jazz age of robust spending and celebration. Com­panies used the new money from loans to expand and employ more people.

"The acceleration in construction resulted in such extensive overbuilding that by the final years of the decade, before the stock market crash, thousands of newly erected office buildings, houses, and apartments sat empty. Office vacancy rates rose, and residential mortgage foreclosures nearly doubled in the final years of the decade. As in other cases, this crisis was inevitable be­fore it was obvious. The only question, and the only area where the president and the Federal Reserve could still have a discretionary impact, was the length and severity of that correction. ...

"The iconic structures of American skylines form the silhouette of the Great Depression: New York's Chrysler Building, Empire State Building, and RCA Building; Chicago's Merchandise Mart, Wrigley Building, and Tribune Tower; Philadelphia's PSFS Building; Los Angeles's City Hall; Dallas's Cotton Exchange Building; Detroit's Fischer Building; and Houston's Gulf Building. These are enduring architectural feats of the 1920s, vestiges of the real estate eruption that came before the fall. Many were speculative projects, unsupported by actual real estate demand; begun toward the end of the 1920s, when loans were still available; and finished after the crash, when lenders had little choice but to make funds available to complete construction or else see their entire loan go bad. None was financially successful for its original investors. They remained partly or largely empty for a decade or more after completion, as would hundreds of others."

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author:	Richard Vague
title:	A Brief History of Doom
publisher:	University of Pennsylvania Press
date:	Copyright 2019 University of Pennsylvania Press
pages:	17-19, 132, 135, 46, 63-64