Across the nation, 2003 will likely best be remembered as the year when low interest rates became the key with which thousands of new buyers unlocked the door to homeownership.

Mortgage interest rates, dipping to historically low levels during some points in the year, fueled home sales nationally and locally and helped sustain solid price appreciation in Massachusetts.

After years of double-digit price appreciation in the Bay State, however, 2003 also was a year in which sellers, buyers and real estate brokers began witnessing a shift to a more balanced real estate market, with sellers no longer holding all the cards. Prices continued to rise but at a much slower pace, as more homes became available for sale and properties – particularly the more expensive dwellings – took longer to sell.

Some economists predicted early in 2003 that a buyer’s market would emerge. But many Realtors said even though the inventory of for-sale homes grew, demand remained strong and the buyer’s market never surfaced. First-time homebuyers and immigrants, spurred by low mortgage interest rates and empty nesters seeking to downsize into maintenance-light homes, helped boost home sales in many parts of Massachusetts.

“The year ended up better than we could have expected,” said Peter P. Casey, 2003 president of the Massachusetts Association of Realtors. “I think that what we’re [experiencing] now is somewhat of a balanced market. I wouldn’t call it completely balanced. There’s no indication that it will be a buyer’s market.”

According to MAR, the average selling price for detached single-family homes sold through October, the most recent month statistics are available, was up 9 percent from last year while the average selling price for condominiums rose 10 percent. For years, Massachusetts had a three- or four-month supply of for-sale homes. That number has grown to about a five-month supply of homes.

Unit sales were also surprisingly high, given the harsh winter weather and war in Iraq. More than 49,300 single-family homes and condos were sold in Massachusetts through the first three quarters of the year, according to statistics from MAR. That’s roughly 4 percent more than the first three quarters of 2002.

“We’re certainly at our second-best year right now, but it could be our best year by the time we finish [the year] in Massachusetts,” said Lexington Realtor and 2004 MAR President Judy Moore.

The rental market in 2003, however, was a different story. Continuing a trend started two years ago, apartment vacancies in the Greater Boston area continued to creep up and landlords offered a variety of incentives – including rent reductions – to retain and draw new tenants.

The construction of new rental housing and college dormitories helped ease the rental housing crunch in the Boston area. Meanwhile, job cuts and the low interest rates that pushed many tenants into homeownership helped shrink the potential pool of renters.

“I think we’ve been following a trend where the renters are more in control of it [rental market] than anything else,” said Lawrence Fisch, owner of Boston’s Preferred Properties.

Fisch estimated that vacancy rates were between 5 percent and 8 percent this year, with landlords offering a variety of concessions, including paying the real estate broker’s fee or waiving the first month’s rent.

“The rental market is soft and it’s getting softer,” said Fisch.

While agents reported a slump in rentals, tenant activists in Cambridge were clamoring for more control over escalating rents. A local initiative petition to bring back rent control in Cambridge failed in November after property owners and the real estate community battled to defeat it.

In Winchester, town officials filed a home rule petition to charge a 2 percent tax on the sale of a home, catching the attention of Realtors across the state. Local Realtors headed to Beacon Hill in September to testify against the measure, which is currently being studied by the Joint Committee on Taxation and requires the state Legislature’s approval. An effort to adopt a transfer tax on the sale of residential property in Plymouth went nowhere this year when the Board of Selectmen tabled discussion of the proposal. The Plymouth and South Shore Association of Realtors is urging local Realtors to keep an eye out for other proposals.

Some Bay State real estate brokers and agents were also infuriated by a proposal approved by the MAR board of directors in December to change agency practices. The agency proposal includes three key components, the most controversial of which would enable the broker-owner of a real estate company to designate one agent to represent the buyer and another agent to represent the seller in the same transaction.

A group calling itself Real Estate Agents for Real Agency Inc. has already started meeting with legislators to urge them to reject MAR’s proposal if it comes before them. Meanwhile, MAR’s Government Affairs Committee will decide some time in 2004 whether to pursue legislative or regulatory changes to agency.

Also on the topic of legislative initiatives, MAR tried hard to boost its lobbying power this year. The trade association raised a record amount for political and lobbying activities in 2003. According to MAR President Casey, the number of members who contributed to the Realtor Political Action Committee doubled this year.

At the beginning of the year, Casey set a goal to increase contributions to RPAC. The National Association of Realtors sets fund-raising goals for each of the state Realtor associations and MAR has consistently failed to meet those goals.

“It’s the first time we have achieved our RPAC goal in over 20 years,” said Casey.

While MAR was building up its political fund-raising activities, one local Realtor board lost two of its most effective Beacon Hill lobbyists.

In June, Edwin J. Shanahan, a 20-year veteran of the Greater Boston Real Estate Board, announced that he was leaving his post as the board’s chief executive officer to start his own full-time lobbying business. Several months later, Joy Conway, the board’s senior vice president for government and industry affairs, announced that she was leaving after spending two decades at GBREB. Conway left to become the director of policy and public affairs for a national group based in New York City called Living Cities: The National Community Development Initiative.

Realtors in Massachusetts and across the country faced a host of other issues, including a new policy unveiled by NAR that seeks to regulate the use of online home listing data. The antitrust division of the federal Department of Justice launched an official investigation into the so-called VOW (virtual office Web site) policy approved by NAR. The policy, which basically instructs brokers on how to share real estate listings with one another on Web sites, includes a controversial opt-out option that enables home sellers and brokers to restrict which other brokers display their listings.

Some Internet-based companies, particularly discount brokers, argued fiercely that the policy is anti-competitive and will unfairly restrict them from posting certain listings online. NAR has delayed implementation of the policy until July.

Writing a New Chapter

In more local news, real estate professionals, homebuilders and affordable housing advocates spent a lot of time and effort scrambling to save Chapter 40B, the state’s so-called anti-snob zoning law. Supporters of the law say it has helped build about 18,000 affordable housing units since it was passed in 1969. But critics feel the law has been abused by developers to build inappropriately dense housing projects in some communities. Nearly 70 bills were filed to alter the law in some way.

Hoping to reach a compromise, Gov. Mitt Romney early in the year appointed a task force to make recommendations to change the law. The task force issued its recommendations and a public hearing was held by the Legislature’s Joint Committee on Housing and Urban Development in June. The committee eventually came up with a compromise bill incorporating some of the task force recommendations. The bill is currently in the Legislature waiting to be hashed out.

“There was significant progress made on trying to find a solution to the 40B controversy,” said Aaron Gornstein, executive director of the Citizens’ Housing and Planning Association and a chief supporter of the law.

Some 3,000 new housing have been constructed and permitted under Chapter 40B in Eastern Massachusetts this year, according to Gornstein.

In 2003, many more communities grappled with the issue of affordable housing on the local level, and Gornstein said many towns and cities focused on developing new housing plans. “That has largely been prompted by Chapter 40B,” he said.

Romney also focused considerable attention on housing this year – regularly emphasizing that high housing costs are key challenge for businesses trying to attract and retain workers.

Romney’s administration made continual pitches for transit-oriented development and smart growth. Smart growth was a key component of a study prepared by Northeastern University’s Center for Urban and Policy Research for the Commonwealth Housing Task Force, a broad coalition of business and academic leaders.

Released in November, the report featured strategies that the task force believes can lead to the construction of roughly 33,000 new homes. A key strategy in the report calls for the state to provide cash incentives to communities for each housing unit that’s built within specially created smart-growth overlay zoning districts.

Housing advocates, meanwhile, didn’t need a study to instruct them to save the Affordable Housing Trust Fund, which has provided money to develop new affordable housing and preserve already built housing for low-income households over a five-year period. The fund was moved to the capital side of the budget and funded for another five years at $70 million.

“Because of the budget crisis [the fund] could have been eliminated entirely,” said Gornstein. “Saving the trust fund was really important because it has been a very good housing production program.”

But while the housing advocates celebrated these and other victories, they also suffered some setbacks.

“We took significant cuts once again to the housing programs because of the fiscal crisis,” said Gornstein.

There were cuts to public housing, and low-income families living in public housing units saw their rents increase. The public housing operating subsidy has been cut by almost $10 million in the last three years, explained Gornstein.

Meanwhile, funding for the upkeep and modernization of public housing, which is part of the capital budget, suffered $8.5 million in cuts from the last fiscal year to the current fiscal year, said Gornstein.

The rental assistance program, which has consistently been cut about $4 million annually for the last several years, dropped from $26.6 million last fiscal year to $22.6 million.

And the budget for the state Department of Housing and Community Development continued its downward slide. DHCD’s total budget is $68 million for fiscal year 2004. In 2001, the budget stood at $161 million – nearly $100 million more.