The good news is the local housing market showed strong gains in September and throughout the first nine months of the year.

The bad news is that recovery could reverse if the government shutdown continues, realtors said.

"We've made a lot of progress this year, and the shutdown could derail that progress," said Lee Trite, president of the Realtors Association of York & Adams Counties.

Last month, 323 homes were sold--a 21 percent increase compared to September 2012, according to statistics released Thursday by the association.

The median sale price also increased 7 percent to $144,900.

Throughout the first nine months of the year, 3, 264 homes were sold in York County, logging a 16 percent increase compared to the same time period in 2012.

The median sale price from Jan. 1 through Sept. 30 increased 4 percent.

But sales could take a hit in October and November because of the shutdown, Trite said.

About 15 percent of buyers in York County rely on fully financed loans from the U.S. Department of Agriculture, which is closed because of the shutdown and not processing loans. The USDA fully finances loans for qualified buyers in rural and exurban areas, such as Dover, Red Lion, Spring Grove and parts of Dallastown.

"Those buyers have been left in limbo," she said. "Buyers, who were supposed to settle at the end of October, can't get approved."

Buyers and sellers have been put in a bad situation, Trite said.

"In some cases, you might have buyers who were renting and expecting to move by the end of the month. Maybe their landlord has rented their place now, but they don't have a new home to get into," she said.

And sellers are becoming reluctant to entertain deals from buyers using USDA loans, Trite said.

"Our realtors are actually telling buyers using USDA loans to not make offers until the government goes back to work," she said.

Another problem all buyers are facing is the closure of the Internal Revenue Service. Tax transcripts are part of the large stack of paperwork involved in the home buying process, and many buyers can't access those transcripts during the shutdown, Trite said.

If there's anything positive about the shutdown, it's that interest rates are down, said local Realtor and previous RAYAC President John LeCates.

"I've jokingly said, 'Maybe they shouldn't go back to work and just leave us alone.' Truthfully, a short shutdown period won't affect the housing market," he said.

While it does affect buyers using USDA loans, those with loans from the Federal Housing Administration are still able to buy. FHA is operating with a small staff, but it is still able to process loans.

"Honestly, some buyers don't even know there's a shutdown unless it affects them directly," LeCates.

The bigger impact to the housing market would be if the government defaults on its debt Thursday, realtors said.

A default would be "devastating" to homeowners whose largest asset would lose value and equity, and for home buyers who would see a dramatic increase in interest rates and tighter credit standards, said Gary Thomas, president of the National Realtors Association.

Even a 1 percent increase in mortgage rates could lead to 450,000 fewer home sales and price many middle-class families out of the housing market, he said.

For a borrower earning $60,000 a year and taking out a $200,000 mortgage, a 1 percent mortgage rate increase would raise monthly mortgage payments by 10 percent, which could disqualify some from the lending picture, Thomas said.

A situation like that would have a long-term, negative impact on the housing market, realtors said.

If buyers and sellers only have a short-term shutdown to manage, statistics might show a dip in sales for October and November.

"If we can nip it in the bud next week, we might be OK," Trite said.