After providing a small but valuable contribution to growth over the past couple of years, residential investment unexpectedly became a drag in the second quarter, contracting at a 7.7% annualised pace. However, we don’t expect this weakness to last. Mortgage rates have fallen towards record lows, and the labour market has continued to strengthen. And with new home sales surging to a nine-year high in July, homebuilding should resume its gradual upward trend before long.
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