“Closings were down in most of the country last month because interested buyers are being tripped up by supply that remains stuck at a meager level and price growth that's straining their budget,” says Yun. The latest S&P Case-Shiller 20-City Composite Index, issued last week, showed home prices were up 5.7% year over year in May.

Mark Fleming, chief economist for First American, says that following seven straight months of increases,” the Loan Application Defect Index is now at the same level as almost two years ago in July 2015. The market shift toward more purchase mortgages, coupled with rising rates and tight inventory, is generating the consistent upward trend in defect risk. Purchase transactions are inherently more at risk of defects, fraud and misrepresentation, and the pressures resulting from one of the strongest sellers' markets in recent memory compounds the risk of an error on a loan application.”

WASHINGTON, DC—Pending home sales posted an increase in June after declining in each of the three previous months, the National Association of Realtors said Monday. The increase was slight, though, and limited supply of available product was one of the factors. Another byproduct of that tight inventory is an ongoing uptick in mortgage application defect risk, according to data released Monday by First American Financial Corp.

June saw a 1.5% uptick in NAR's index for pending home sales, with all regions but the Midwest seeing an improvement. “The first half of 2017 ended with a nearly identical number of contract signings as one year ago, even as the economy added 2.2 million net new jobs,” says Lawrence Yun, the association's chief economist. “Market conditions in many areas continue to be fast paced, with few properties to choose from, which is forcing buyers to act almost immediately on an available home that fits their criteria.”

Yun adds that the low supply is “an ongoing issue holding back activity. Housing inventory declined last month and is a staggering 7.1% lower than a year ago.”

Supply issues were behind the movement in another sales metric measured by NAR: existing-home sales, which slipped 1.8% in June, the association said last week. Existing home sales represent completed transactions on properties that include single-family homes, townhomes, condominiums and co-ops.

“Closings were down in most of the country last month because interested buyers are being tripped up by supply that remains stuck at a meager level and price growth that's straining their budget,” says Yun. The latest S&P Case-Shiller 20-City Composite Index, issued last week, showed home prices were up 5.7% year over year in May.

Mark Fleming, chief economist for First American, says that following seven straight months of increases,” the Loan Application Defect Index is now at the same level as almost two years ago in July 2015. The market shift toward more purchase mortgages, coupled with rising rates and tight inventory, is generating the consistent upward trend in defect risk. Purchase transactions are inherently more at risk of defects, fraud and misrepresentation, and the pressures resulting from one of the strongest sellers' markets in recent memory compounds the risk of an error on a loan application.”