Early in 1854 a major economic depression hit San Francisco. The once rich placer gold deposits were almost gone and expensive quartz crushing machinery was needed to sustain gold production. Miners who lacked the resources to buy such equipment were pouring into San Francisco. Their mines no longer ordered supplies from merchants in the city and bankers started to call in their credit. The building boom of 1853, when over three hundred brick buildings had been constructed, many of them three stories tall, was over and property values fell by forty percent. That fall, Henry Meiggs, a respected businessman, politician and waterfront developer, fled town leaving over one million dollars in debt.
In the spring of 1854 the effects of the depression on real estate can be seen in the public sale in March of portions of the government reserve property near the waterfront compared to the public auction from only a year before. Ninety-three beach and waterfront lots between Washington and Jackson and five lots between Pacific and Broadway were sold for two hundred and thirty five thousand dollars, an average of about twenty four hundred dollars per lot, one quarter of the price from the city slip sale in December of 1853.