Although Boston’s Big Dig project will not be fully completed until 2005, much of the elevated Central Artery will be demolished in 2004, giving residents their first glimpse of the open space that will become the Rose Kennedy Greenway.

The housing market may not produce the hot sizzle in 2004 that it has in the past several years, but it also isn’t likely to burn out, according to industry experts.

Home price appreciation is expected to ease in the New Year as mortgage interest rates rise, but demand from immigrants, first-time homebuyers and empty nesters will continue to bolster residential real estate in Massachusetts and nationwide.

“It looks like in 2004 it will be very hard to top 2003,” said Judy Moore, president of the Massachusetts Association of Realtors. “It will be a more balanced market that we’re reaching. It does not look like we’re going to be approaching the buyer’s market that some had talked about. That would require a lot more inventory on the market than we actually have right now.”

Where it was not uncommon to see double-digit home price appreciation in many parts of the Bay State during the last few years, home prices will likely increase anywhere from 3 percent to 5 percent in 2004, predicted Moore. Nationally, median prices are expected to rise about 4 percent to 5 percent in 2004, according to the National Association of Realtors.

Local Realtors have also seen some indications that the luxury home market, which has suffered since 2001, will begin to recover. In Lexington, for example, Moore pointed to two homes priced around $2 million that have been on sale for quite some time. One home recently sold and the other has generated a lot of “activity.”

“It looks like [the luxury home market] may pick up, maybe not to the level it had in 2000 and 1999,” said Moore, a real estate broker with Re/Max Premier Properties in Lexington. “But I think that it basically looks like we’re going to have a stronger market in the higher end than we have had [in 2003].”

Real estate experts, however, say there are several variables that could affect the industry and the overall economy, including the presidential election, unemployment and interest rates.

“If interest rates pick up too fast, it could slow things quite a lot,” said Weston Realtor and former MAR President Peter P. Casey.

In the rental market, some real estate professionals are expecting that tenants will continue to have more of a choice about where they live and how much they pay in rent.

Several years ago, property owners in Greater Boston could demand high rents and increase rents without the fear of losing tenants, according to industry leaders.

That hasn’t been true in the last two years and won’t be the case in 2004. “The tenants are in control,” said Lawrence Fisch, president of Boston’s Preferred Properties.

Fisch predicted that rental rates will remain flat and some will take a slight dip in 2004. Landlords who want to retain tenants and attract new ones will have to maintain and improve their properties, he said.

“The real estate market in general is just going to be a little tough for the landlords that don’t react,” said Fisch.

Taking the Initiative

Meanwhile, real estate professionals and affordable housing advocates will be watching closely to see what action, if any, the Legislature takes to change Chapter 40B, the state’s so-called anti-snob zoning law.

A compromise bill has yet to be acted on and with the legislative session scheduled to end July 31, some supporters are hoping for a resolution in upcoming months.

Realtors, in particular, are also anxiously waiting to see whether lawmakers approve a home rule petition filed by the town of Winchester to charge a 2 percent real estate transfer tax on properties that are sold. Real estate professionals have fiercely lobbied against such taxes, saying they place an unfair burden on homebuyers and sellers.

Many Realtors fear that if the Winchester transfer tax gets approved, more communities grappling with budget cuts and searching for new revenue sources will attempt to pass similar tax proposals.

“Transfer taxes are going to be huge … in 2004,” said Moore.

Some are worried that the Winchester proposal may get state approval. “Dealing with home rule petitions is an uphill battle,” acknowledged Casey.

Housing leaders are also going to be fighting against any bills or measures that they believe restrict housing development and will encourage initiatives that promote housing construction.

The Commonwealth Housing Task Force, a coalition of housing advocates and business and academic leaders that released a report last year featuring strategies to produce more housing, is expected to file a bill incorporating the ideas highlighted in the report. Specifically, the report called for the state to provide cash incentives to communities for each housing unit that is built within specially created smart-growth overlay zoning districts.

On another front, affordable housing activists are planning to urge the Legislature to act on a housing bond bill that will provide money for housing programs for disabled people. Part of the bill includes funding for a home modifications program that helps homeowners renovate their homes to accommodate family members with disabilities. Although $10 million was authorized for the program back in 1999, currently all funds have been committed.

Groups like the Citizens’ Housing and Planning Association will once again make a push for an employer-assisted housing bill that would have the state provide assistance to companies and employers that help their employees with housing costs. The bill was stalled in conference committee this year.

Saving the current stock of affordable housing also will be high on the agenda of CHAPA and other housing advocacy organizations. “We’re very concerned about the preservation of existing affordable housing,” said CHAPA Executive Director Aaron Gornstein.

And while Gov. Mitt Romney’s administration talked a lot about housing and smart growth in general terms in 2003, Gornstein and other housing activists are anticipating more details on Romney’s housing plan to emerge in the New Year.

“Now we’re expecting more detailed programmatic initiatives,” said Gornstein.

On the topic of initiatives, Bay State Realtors will be hearing more about a proposal to change the way agency is practiced in Massachusetts. The MAR board of directors approved a proposal in December that has generated controversy because it includes a component that would allow 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 of Realtors called Real Estate Agents for Real Agency is opposing the effort to change agency in the state.

The proposal will be reviewed by the Government Affairs Committee of MAR, which will decide whether to pursue legislative or regulatory changes. In anticipation of the new proposal, some real estate companies are expected to start altering their current business models in 2004.

“We feel strongly that we are reacting to consumer demand for choice, and this is a good thing for the consumer,” said MAR President Moore, referring to the agency proposal recently approved by the board of directors. “We feel that it is the best proposal that we could possibly put together.”

In addition to the agency battle, Realtors in Massachusetts and across the country will be watching to see the outcome of a dispute over a policy to regulate the use of online home listing data. The antitrust division of the U.S. Department of Justice launched an investigation into the so-called VOW – Virtual Office Web site – policy approved by the National Association of Realtors last year. The policy instructs brokers on how to share real estate listings with each other on Web sites, but some companies say it’s unfair because it includes an opt-out option that enables home sellers and brokers to restrict which other brokers can display their listings. NAR wants listing services to implement the VOW policy by July of this year.

The housing sector – which has sizzled in the last few years and bolstered the economy through the recession – isn’t likely to burn through records in 2004, according to industry experts.

But residential real estate will hold strong in Massachusetts, as home price appreciation eases only slightly and demand from immigrants, first-time homebuyers and empty nesters continues, local industry watchers predict.