Following years of sharp price increases and robust sales activity, the red-hot housing market took a long-anticipated breather in 2005. But it was far from the bust that many predicted, and demand for condominiums proved to be so strong that 2005 could easily be dubbed the year of the condo.

Bay State homebuyers and sellers found themselves on more equal footing for the first time in at least four years, as the number of unsold homes grew, for-sale properties took longer to sell and sellers reduced their asking prices in hopes of attracting offers.

“What we [saw] in 2005 is quite in line with what we expected,” said Maggie Tomkiewicz, a Dartmouth real estate broker who served as president of the Massachusetts Association of Realtors this year. “We’re seeing that shift to a more normal market, and this is really a good sign for the long-term health of the housing market.”

MAR is projecting this year’s home prices to be 5 percent to 7 percent higher than 2004. In prior years, the state experienced double-digit home price appreciation annually.

But Tomkiewicz explained that kind of appreciation is unusual and unsustainable. In a “normal, stable” residential real estate market, home prices rise 3.5 percent to 5 percent annually, she said.

“We knew Â…we would not sustain that [double-digit appreciation] forever,” she said.

Contributing to the shift in the market was a bigger inventory of unsold homes in 2005. According to MAR, there was an 8.6-months’supply of homes for sale as of October. In the prior two years, the state had about a five- to six-month supply, said Tomkiewicz.

“It’s an equal playing field [between buyers and sellers] when we have 7.5 to 8.5 months of inventory,” she said.

Even though buyers had more homes to choose from, home prices continued to rise steadily. The median price for single-family homes sold in Massachusetts through November of this year climbed to $345,000, a 3 percent increase from the same period in 2004, according to The Warren Group, parent company of Banker & Tradesman. The Warren Group collects sales statistics from the state’s registries of deeds.

Sales of single-family homes, however, slipped 6.5 percent during those months. Some 58,906 single-family homes were sold through November, down from 63,038 a year ago.

Single-family home sales and prices may have eased in 2005, but the condo market boomed. Bay State condo sales shot up 13.7 percent, with 32,094 condos selling through November compared to 28,227 the prior year. The median price for condos sold through November jumped 8.6 percent to $279,000.

Meanwhile, the residential rental market began to stabilize after four years of trending down.

“In general, this has been a year of recovery for the market,” said Thomas Meagher, president of Northeast Apartment Advisors, an Acton-based firm that surveys the local rental market.

The apartment occupancy rate in Greater Boston stands at 95 percent and the average rent is $1.53 per square foot, about the same as April 2004, according to Meagher.

Northeast Apartment Advisors’ most recent research shows that rents for Class A apartments in Boston and Cambridge are $2.67 per square foot, up slightly from $2.65 per square foot in April, and the occupancy rate is unchanged at 95.9 percent.

The number of property owners offering concessions, such as breaks on rent, also declined substantially. There were 157 properties in the metropolitan area offering concessions in April of this year, compared to 102 that are offering them now, according to Northeast Apartment Advisors, which will be issuing its next market report in January.

Major Victories

Meagher said the fact that the rental market was able to stabilize during a period of no significant job growth, soaring condo sales and with thousands of new apartments and condos under construction or coming online is remarkable.

“The fact that the market was able to Â… reach a stable level I think is good news,” said Meagher, noting that 7,465 rental units and nearly 10,000 condos are either under construction or have recently been completed in Greater Boston.

In other news, housing advocates scored some major victories this year.

A $200 million housing bond bill, which included funding for the Affordable Housing Trust Fund and the Housing Stabilization Fund, was passed. The trust fund has helped to create 2,600 housing units over four years – 40 percent of which have been for households earning 30 percent or less of the area median income – and the stabilization fund has preserved or produced 5,220 units over the past 10 years.

The budget for the state Department of Housing and Community Development was boosted from $80 million to $92 million. More funding was provided for public housing, the state’s rental assistance program and the Residential Assistance For Families in Transition, a homelessness prevention program.

“We were hopeful that we would get an increase in the housing budget because the revenue projections are more favorable this year than they were last year,” said Aaron Gornstein, executive director of the Citizens Housing and Planning Association.

Housing received some other perks from legislators. Included in the economic stimulus bills that both the House and Senate passed was the extension of a program that has provided grants and loans to developers and communities to clean up brownfields, or contaminated sites across the state. The program has helped transform some sites into mixed-use developments. In addition, the bills included $30 million for tax breaks for those who redevelop brownfields.

The Senate version of the economic stimulus bill included $5 million to create a state matching fund that would help employers recruit and retain employees by assisting them with purchasing or renting a home. The employer-assisted housing bill, which has been supported by CHAPA, was left out of the economic stimulus package approved by the House. The two versions of the bill will be worked out in 2006.

Gornstein said one of the biggest disappointments this year was that lawmakers let a two-year program that enabled the state to more quickly sell state-owned surplus land expire. An estimated 600 housing units are projected to be built on former state-owned land that has been sold in an expedited fashion.

“We thought it was a successful initiative that brought in close to $35 million in state revenue,” in two years, Gornstein said.

With the program no longer in place, it will take much longer for such surplus land to be sold, with local review and state legislation needed anytime a parcel – no matter how small – is about to be sold, explained Gornstein.

The program is particularly critical because the Smart Growth Trust Fund is supposed to be funded through the sale of surplus land.

The trust fund was established to pay for the state financial incentives that are provided to communities through Chapter 40R, legislation that was passed last year to encourage cities and towns to create special overlay districts where dense mixed-income housing can be developed in smart-growth locations, including near town centers or transportation nodes.

Under Chapter 40R, cities and towns that create the overlay districts are eligible to receive upfront payments from the state and then $3,000 for each building permit that’s issued.

In November, Chapter 40R was strengthened with the unanimous passage of Chapter 40S, a law that provides additional school aid to communities to cover increases in school costs stemming from the creation of the overlay districts.

Homebuilders and others in the real estate industry pushed for passage of Chapter 40R and 40S.

The real estate industry, including members of MAR and the Greater Boston Real Estate Board, also threw its support behind Nicole’s Law, recently passed legislation that requires the installation of carbon monoxide detectors in residential dwellings.

Many local Realtors also underwent training to deal with the changes arising from the so-called agency law, which went into effect in July. The law forced many real estate firms to examine and change how they conduct business and represent consumers.

Under the law, real estate brokers and agents are required to get a home seller’s approval to allow subagency – the practice of allowing agents other than the listing agent to represent the seller during a real estate transaction – to occur.

In addition, the law enables real estate brokers to designate agents within the company to represent the seller and buyer in the same transaction. And Realtors also have guidelines on how to practice as facilitators who don’t represent the buyer or seller in a home purchase but instead help put the deal together.

While GBREB and MAR were offering tips to members on the new agency law, the state’s two largest trade groups were also welcoming new leaders.

MAR named Robert N. Authier as its new executive vice president in January. Authier, who last served as chief executive officer of the Virginia Association of Realtors, was MAR’s public affairs director in the 1970s and its executive vice president from 1988 to 1993.

GBREB also experienced a shakeup in its leadership, with the abrupt resignation of Chief Executive Officer Ted Jankowski in February. Jankowski held the post for less than a year. Gregory P. Vasil, who was GBREB’s senior vice president of legislative affairs, was appointed chief executive officer in October.