Recent data show the South Florida real estate market, like much of the country, may be slowing down. Some blame the recent hurricanes, others blame the departure of speculators from the market. Either way, Lennar ( LEN) hopes to boost sales in its Palm Beach division by raising its commissions to outside real estate brokers, after reducing them less than a year ago.

For its communities ranging from Boca Raton to Vero Beach, Lennar and its U.S. Home division are now offering a "3-4-5" program to outside brokers.

The program works as follows: If a broker sells one home, he gets a 3% commission; if he sells a second home, he gets a 4% commission; and if he sells a third home, he gets a 5% commission, according to a fax promoting the program that was sent to local brokers. Lennar's local sales offices confirmed that the program allows brokers to combine the sales across any of the nine communities in Lennar's Palm Beach division.

The move is a swift reversal from earlier this year, when sales were fatter and Lennar dropped its commission to real estate agents from 3% to 2%.

"They dropped commissions from 3% to 2% a year ago. They said we don't need realtors as much. ... Now that sales have dried, they didn't just go back to 3%, they went up to 5%," says Mike Morgan, broker-owner of real estate brokerage firm Morgan Florida. Morgan says other builders like KB Home ( KBH) and Centex ( CTX) always kept their commissions at 3%. Morgan -- who has shorted several homebuilder stocks -- holds the theory that Lennar dropped the commission last year when sales to investors were booming, and is now raising the rate because investors have mostly exited the market.

The new broker incentive comes a month and a half after Lennar tried to boost sales in its Palm Beach division by dropping its strict antiflipping clauses that had been inserted in sales contracts to deter speculators from buying its homes.

Lennar spokesman Marshall Ames says the Miami-based corporate office would not be aware of what each regional sales office is promoting because the company has about 75 divisions, each with its own marketing programs and incentives.

"We don't address individual market situations," Ames says. The head of Lennar's Palm Beach division did not return a call seeking comment.

Ames downplayed Lennar's broker program by comparing it with Wal-Mart's ( WMT) sale of $398 laptops the day after Thanksgiving. By selling computers at steep discounts, it didn't mean sales were bad at Wal-Mart, it's just part of the sales program, Ames says.

Aside from the fact that the Wal-Mart comparison probably isn't completely apt -- since Wal-Mart was trying to drive traffic to its stores, not sell $400,000 homes -- the latest report from the Florida Association of Realtors shows that realtor sales in October slowed across most of South Florida. In the Fort Pierce-Port St. Lucie market, sales dropped 22% in October from a year ago. In the West Palm Beach-Boca Raton market, sales fell 36%. Both areas comprise Lennar's Palm Beach division. However, the median sales price jumped 17% and 24%, respectively, in these markets, suggesting that perhaps fewer homes are being sold because not as many people can afford them.

Part of the reason for the sales drop in South Florida can be attributed to Hurricane Wilma, the Florida Association of Realtors says. It was difficult to close on sales contracts because insurers temporarily stopped writing new insurance policies for homes after the hurricane, says John Manzione, a broker with TreasureCoast.com Realty.

Manzione was not aware of Lennar's new broker commission policy but says he's not surprised at the move, especially in light of hurricane effect. "Sales have dropped. They probably panicked," he says. Manzione says the market is generally strong but it is no longer a sellers' market, as pricing is reaching a plateau.

But several local watchers say the market had been slowing even without the hurricanes. "The market for existing homes is starting to get a little softer and that's reflected in a greater number of listings and a slower pace of sales," says Brad Hunter, director of Metrostudy South Florida, a real estate market research firm. "That is overflowing into the new home market."

Part of the problem is the lingering effect from the investors or speculators who "have been pumping up the market to sort of an unnatural, unsustainable level for the past few years," Hunter says.

"Homebuilders have to compete more with investors who bought homes eight, nine months ago, and now those homes and town homes are complete and they're marketing the homes on the resale market," Hunter says. Speculators can make a profit and "still undercut many of the homebuilders selling new preconstruction homes," he adds. "That's becoming a little bit of a competitive problem for the homebuilders."

Hunter expects builders to offer more incentives next year to homeowners and brokers in order to move homes.

Morgan, the broker, agrees. "Sales have slowed dramatically, there is a buildup of inventory of homes coming online, and there are less buyers in the market," he says.

The Florida market is expected to remain strong in the long run because of the continued demand from baby boomers looking to retire in the area. But over the next year, Morgan expects things to be rocky in South Florida. Morgan has turned so negative on the market in the short term that he is currently shorting homebuilding stocks in his brother's account, including Lennar, KB Home, Pulte ( PHM), Toll Brothers ( TOL) and WCI Communities ( WCI).

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