Buyers Ignore Shutdown as Prices Jump Again

Despite the media hoopla, the government shutdown turned out to be a nonstory for Greater Boston's red hot real estate market. In fact, it is hard to find any sign of buyers getting cold feet in the latest stats, despite all the crazy talk in Washington that dominated the headlines for a good chunk of October.

The full impact of the shutdown won't be seen until December and January, when sales inked in October finally close. Still, prices and sales soared in September leading up to the short-lived shutdown of the federal government, which ended Oct. 17. It was the best September for Massachusetts home sales since 2005, while the median price rocketed 16 percent to $323,625, The Warren Group reports.

The Boston area is leading the charge nationally when it comes to rising home values, with double-digit increases, even as prices start to cool in many other cities. Our booming tech and life science companies are keeping the economy rolling inside the I-495 corridor and providing a steady stream of buyers with hefty paychecks. Meanwhile, while demand remains high, supply is low, with a years-long shortage in new construction having put the squeeze on the number of homes for sale.

In fact, there are signs the real estate rebound is now reaching beyond Route 128 and the inner suburbs of Cambridge and Boston to the outer suburbs along 495. And on the macro level, it looks like there won't be any wrenching readjustment in mortgage rates anytime soon. Just recall Ben Bernanke's big surprise announcement back in September, when the Fed chairman pledged to stay the course in his multitrillion-dollar campaign to keep interest rates at rock bottom levels.

His newly named successor, Fed Vice Chair Janet Yellen, is an activist on monetary policy and likely to keep the central bank's easy money policies flowing. "It has turned over the last year from a strong buyer's market to a strong seller's market," said Ryan Wilson of Keller Williams.

The Fed's decision to stick with low rates will "increase people's purchasing power and give buyers the ability to make that extra stretch to get into a property," Ryan added.

Here are some key trends to keep an eye on:

• Rising prices: Home values within I-495 shot up 10.6 percent in September, compared to 7.2 percent nationally, Zillow finds in its latest report, to a median value of more than $343,200. Moreover, Boston itself and the western suburbs are back at peak pricing or very close to it. Suffolk County, basically Boston proper, set a new record in August, with a median value of $368,400. Middlesex County, which includes Cambridge and the affluent western suburbs, stands at $391,900, or within striking distance of its 2005 high of $413,200, according to Zillow.

• Falling inventory: The conventional thinking among real estate market analysts is home prices can't keep increasing at their current rate, with a cooling off just ahead. But like politics, all real estate is local. Simply put, this projection doesn't match the reality on the ground in the Boston area. Home, condo and apartment construction has lagged since the early 1990s and is now just edging up - ever so slightly - from record lows. The dearth of new construction means there is no supply of new homes just around the corner to meet surging demand. The number of listings on the market in the Boston area was down at the end of August more than 31 percent from the year before, having fallen more than 9 percent just from July to August alone, Redfin reports. The shortage of homes for sale will only get worse as the fall market peaks.