Lennar Finding Florida Market Not So Sunny

Greg Gieber, an A.G. Edwards analyst who wasn't aware of the Lennar move, says he hasn't heard of any homebuilders reversing clauses like Lennar has. He expects speculative activity might be dying down nationally but remains concerned about its influence on the national market. "If it's in the condo market, I'm less worried than if it's in the detached single family market," he says. Townhomes lie somewhere in between condos and single-family homes in terms of his concern, Gieber says.

Rebecca Adams, a Realtor with Re/Max in Stuart, Fla., says speculators have accounted for a good portion of the buyers of newly constructed homes in the Palm Beach market over the past year. Once builders starting deterring them more, inventory piled up, she says.

"Now because they've said 'no more investors,' now they have to offer the incentives," Adams says. "I think things are slower than they had anticipated."

Adams says some builders are now offering everything from free appliance upgrades -- like a $250 to $500 sink upgrade -- as well as agreeing to pay a percentage of the closing costs (about 3%), and paying for title insurance (which on a $400,000 home amounts to about $2,400). Adams says offering to pay for title insurance is new, and that the percentage paid on closing costs has risen lately.

She also says the anti-flipping clauses were never a great deterrent for speculators, who are still hanging around looking for properties to buy. If speculators can sell for a $100,000 profit in under a year, they'll happily give builders a percentage of that -- even as high as 20% -- she says.

With speculators now welcome at the Lennar properties once again, perhaps demand will shoot up. If anything, the move points to how certain areas in South Florida have cooled off compared to 2004 as homebuilders attempted to drive away speculators. "A year ago, this was an order-taking market," says Gieber, the A.G. Edwards analyst. "I think things are slowing. Things are not falling out of bed."