Two years ago, a planned residential tower makai of McKinley High School was virtually sold out after experiencing a rush of demand that included a lottery where buyers far outnumbered available units. But today, with tower construction nearing the halfway point, fewer than half the units still have committed buyers.

Like the Hawai'i economy and world financial markets, sales at new condominium projects in Honolulu have taken a bad turn in the past several months.

The market turmoil, which over the last few weeks has become uglier and uglier, is icing sales at nearly a half-dozen major Ho-nolulu condo projects — planned, under construction or complete — with significant inventories to sell.

"People are freaked out. Nobody wants to even buy lunch," said Beth Worrall Daily, principal broker at the local Sotheby's International Realty affiliate Mary Worrall Associates.

Not all life has gone out of the market, but developers are adding incentives, lowering prices or waiting longer for sales to trickle in from buyers who have become more hesitant since economic uncertainty piled onto what already had been a weakening local real estate market.

TAKING A BREAK

One high-rise planned in Kaka'ako between Pi'ikoi and Kamake'e streets has been put on hold, and analysts say it has become more difficult for any new plans to get out of the ground.

The situation stands in sharp contrast with an earlier batch of condo towers finished within the last few years and opened as complete or near sellouts, including Capitol Place that opened Downtown in April with 374 of 394, or 95 percent, of units sold.

Another recently completed project, Keola La'i on South Street in Kaka'ako, opened in March with about 330 of 352 units, or 94 percent, sold or in escrow.

Honolulu's condo tower delivery boom began nearly three years ago with the sold-out luxury tower Hokua at 1288 Ala Moana, and was followed by other sellouts or near sellouts Ko'olani at 1189 Waimanu St. and the twin oval towers Moana Pacific at 1288 Kapi'olani Blvd.

During the boom, buyers rushed to beat out other buyers and avoid paying more later to developers that easily raised prices for subsequent sales.

But now some buyers are anticipating that mortgage rates will remain low and prices may come down if they wait.

"Why buy now if you can pick it up tomorrow for cheaper?" said local housing market analyst Ricky Cassiday. "It's not a bad guess that that is what's going to happen. It's a bad atmosphere."

PULLING BACK

Moana Vista, a planned 492-unit condo at 1009 Kapi'olani Blvd. makai of McKinley, appeared it would be among the batch of Honolulu's home-run high-rise projects. Two years ago, 466 prospective buyers entered a lottery to buy 192 units reserved at Moana Vista for owner-occupants. Strong investor interest resulted in the balance of units being nearly sold out, save 126 units being kept as rentals under an affordable housing requirement.

But today, only 160 nonbinding reservations remain for the 366 for-sale units. That's 44 percent of the inventory before buyers are asked later this year to sign binding purchase contracts requiring a 10 percent deposit.

"We are not quite at the sales level we want to be at," said Allen Leong, operations director for project developer KC Rainbow Development, which also produced Moana Pacific. "People are hesitant to sign contracts and make commitments right now."

Leong said the pullback in reservations began six or seven months ago following layoff announcements by companies including Aloha Airlines, NCL America and Hawaii Medical Center. Since then, several other companies have laid off employees, and global financial markets have come unglued.

Leong now has a conservative estimate that Moana Vista will be close to 80 percent sold out in early 2010 when construction is slated for completion, and hopes that financial markets stabilize well before then to allow buyer confidence to return.

If that hope is realized, it would make Moana Vista a success by condo tower development standards. During the state's last real estate market contraction, the 425-unit luxury Hawaiki Tower in Kaka'ako was just 43 percent sold when it opened in 1999 — and that was after construction was halted for three years to allow the market to improve.

'WE'RE PLUGGING ALONG'

Another project caught up in today's softening real estate market is Allure Waikiki, a 35-story luxury condo that broke ground in January on the former site of the Wave Waikiki nightclub. The tower structure has reached the 11th floor, but binding sale contracts are still stuck about where they were at the beginning of the year at about 60 of 291 units.

"We're plugging along," said Carole Manuwa, project sales director with local real estate brokerage firm Prudential Locations LLC.

Allure Waikiki's developer, Chicago-based Fifield Cos., maintains a previously stated goal of the project being sold out upon completion in early 2010. "We are aggressively marketing to meet that goal," Manuwa said. "There are still some good buyers out there."

A third Honolulu condo under construction is The Vanguard Lofts, a posh loft-style project that is converting and expanding an old Kaka'ako office building into a six-story complex with 32 units featuring rooftop lanais at 720 Kapi'olani Blvd.

When the project sales office opened in July with 16 units released for sale, the developer reported taking reservations and $50,000 deposits for 14 of the 16 units. Now the developer said it revised the initial unit release to 12 units and has six binding contracts. Vanguard Lofts is slated for completion in April.

Developers of two of the three projects under construction — Allure Waikiki and Moana Vista — said they haven't reduced prices, while Vanguard Lofts has made a small reduction.

Typically condo developers will go to great lengths to avoid reducing prices because it tends to anger buyers who committed to a higher price earlier.

Allure Waikiki in some cases is offering buyers incentives, though the incentives aren't advertised. Prices range from $668,050 to $2.1 million.

"The pricing has been very stable for condos in Waikiki," said Kevin Farrell, a senior vice president with Allure Waikiki developer Fifield. "We're not cutting prices."

At Moana Vista, where prices range from the $500,000s to high $800,000s, Leong said prices remain above initial prices that started at $425,000 to $850,000 two years ago, and that the project remains competitive with units for sale in the recently completed Keola La'i and Capitol Place towers.

Vanguard Lofts prices range from the $800,000s to $2.1 million, and were reduced by 8 percent. Also, the developer has introduced incentives such as upgrades to unit interiors.

Besides Vanguard Lofts, a residential tower completed last year hasn't been able to hold the line on prices.

909 Kapi'olani, which opened in September 2007 at the corner of Ward Avenue and Kapi'olani Boulevard, had released units for sale in phases with the idea to raise prices if the market remained strong. In mid-2005, the project was 80 percent pre-sold. But upon opening, sales were closer to 70 percent, or around 165 of 227 units.

Within a few weeks of opening, the developer began offering special incentives including a price reduction up to $80,000.

This year, about 20 more units have been sold at 909 Kapi'olani, and project sales are now being handled by Mary Worrall Associates, which was hired last month and is the third broker retained by the developer, Posec Hawaii Inc.

PRESSURE IS ON

Worrall Daily said prices recently were reduced from 12 percent to 40 percent, largely because units in the building didn't have uniform pricing based on size, location and amenities. "We're now priced really correctly," she said.

Cassiday said the pressure is on for developers to entice buyers with lower prices or incentives.

"Right now you have to give a deal to make a sale," he said.

Another factor hindering sales is a concern among some prospective buyers that condo projects under construction might not be completed if developers or their lenders run into trouble.

Last month, the 146-unit Ritz-Carlton Club & Residences on Maui suffered a financing blockage after Lehman Brothers Holding Inc. filed for bankruptcy and failed to release $35.6 million for the project that is 80 percent built.

Developer Kapalua Bay Holdings LLC — which includes Maui Land & Pineapple Co., Marriott International and Steve Case's Exclusive Resorts LLC — said the partners are advancing money to continue construction and expects to be able to arrange new financing if Lehman continues to withhold funds.

Farrell with Fifield said prospective buyers have visited the sales office and said they doubted that Allure Waikiki would be completed. Farrell said the project is fully funded and bonded to ensure construction is finished.

"Allure Waikiki will get done without a doubt," he said.

Leong with Moana Vista said that project's financing also is secure. A representative of Vanguard Lofts said financing is in place with First Hawaiian Bank.

Though the developers are struggling to make sales, they said recent huge stock market declines may encourage some investors to put money into real estate despite weakness there. Also, developers said tough financing has made it harder for any other developers to start competing projects.

PROJECTS IN LIMBO

A California company that bought 5.2 acres in Kaka'ako nearly two years ago said last September it intended to begin building a 295-unit tower between existing luxury high-rises Hawaiki and Ko'olani just 'ewa of Ala Moana Center by the end of this year.

But that project has been put on hold, according to D. Scott MacKinnon, a Honolulu attorney representing landowner Woodridge Capital LLC.

"Credit is basically unavailable," he said. "There are no plans right now to proceed."

Another previously announced project, a 120-unit condo at 1700 Kalakaua Ave. in Pawa'a, was called off earlier this year after the developer sold the land in February.

A third potential project is a luxury condo up to 250 feet high envisioned by Sam House Development LLC, which bought a lot on Kapi'olani fronting Ala Moana Center in June 2007, though no timetable for proceeding has been announced.

At least two planned projects, however, are still moving forward.

One is 1723 Kalakaua, a 120-unit condo in Pawa'a near the Hawai'i Convention Center planned by a San Francisco construction company.

The developer released an initial phase of 30 units for sale in March, and has made 70 binding sales, according to Kai McDurmin, project director with sales broker Coldwell Banker Pacific Properties. The developer needs 20 more sales to obtain financing that would allow construction to proceed, which McDurmin anticipates will happen by the end of this year or early next year even with a slowed sales pace.

McDurmin added that unit prices were raised $10,000 to $40,000 since sales began. Initial prices ranged from $292,500 to the low $500,000s for units with 407 square feet to 703 square feet of living space.

The other planned Honolulu condo project is a 176-unit high-rise at 1315 Kalakaua Ave. in Pawa'a. That project, called Holomua, is trying to obtain county approval to exceed the area's building height in return for offering 51 percent of the units at affordable prices to buyers with low to moderate incomes.

Serge Krivatsy of project developer THM Partners said he hopes approvals will be obtained to allow sales to begin by the end of the year and construction to start by March.

Securing financing has become more difficult, but Krivatsy said the project has a lender lined up.

"We're in good shape," he said.