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52 | Th e M Rep o RT o r i g i nat i o n s e r v i c i n g a na ly t i c s s e c o n da r y M a r k e t ANALYTICS the latest local edition investors Predict slower Path to rate Hikes Survey ShowS marketS don't See eye to eye with the Fed'S predictionS. CALIFORNIA // A new survey from the Federal Reserve Bank of San Francisco finds investors aren't buying into the central bank's projections of interest rate increases in the coming years. In a study published last month, analysts for the San Francisco Fed said their model, which is based on investor activity, forecasts a federal funds rate of 0.75 percent at the end of 2015 and 2.13 percent the following year. In their latest economic pro- jections from June, the members of the Federal Open Market Committee (FOMC) estimated a median federal funds rate of 1 percent at year-end 2015 and 2.5 percent at the end of 2016. Based on their own modeling, analysts at the San Francisco Fed said investors put the probability of the federal funds rate hitting the FOMC's target next year at 31 percent, with 2016's projected rate garnering a probability of 27 percent in the minds of investors. "Our analysis shows that, on balance, the public seems to ex- pect more accommodative policy than FOMC participants," the researchers concluded. The investor model also features a smaller range between the upper and lower forecasts than the predictions offered by Fed policymakers, "suggesting the public also may be less un- certain about their projections," according to the Fed analysts. Federal Reserve Chair Janet Yellen and many of her col- leagues have stressed a slow, thoughtful approach to interest rate adjustments so as not to disturb the economic recovery. However, the fact that investors apparently anticipate an even slower run-up in rates could indicate their failing optimism in the economy's projected growth over the coming years. Mixed Housing, economic Picture in alabama what'S true For the country iS alSo true For the yellowhammer State. ALABAMA // Alabama has been slow to recover economically since the recession officially ended five years ago, and the state's housing market has strug- gled along with the rest of the nation so far this year, according to a special commentary issued by the Wells Fargo Economics Group last month. In the commentary, Wells Fargo reported that Alabama's nonfarm payrolls remain 4.7 percent below their pre-reces- sion peak—the fourth worst of any state. Not only that, but Alabama's real gross domestic product (GDP) increased by only 0.8 percent in 2013, while the national real GDP grew at a rate of 1.8 percent for the same period. Poor performance in the public sector has been a major factor in Alabama's slow overall economic recovery, Wells Fargo reported. Manufacturing of transpor- tation such as automobiles, aircraft, ships, and boats, has been a strength in Alabama, as have education and health ser- vices, according to Wells Fargo's economists. Slow growth in the state's population and in em- ployment, however, has resulted in low housing demand. Home prices in Alabama are currently 11.8 percent below their pre-recession peak, which is close to the national average, according to Wells Fargo. But after experiencing a surge in 2013, Alabama home sales fell off dramatically in 2014. The percentage of home sales that are new homes remains low, indicat- ing slow residential development. The number of foreclosures in Alabama has been relatively low, considering the state's soft job market, while the number of homeowners delinquent on their loan by more than 90 days falls in line with the national average. In the coming years, Alabama should see gains in the construc- tion sector, since several new industrial projects are pending, Wells Fargo's report concluded. despite struggles, High Hopes for colorado Housing challengeS remain, but economiStS are optimiStic. COLORADO // Though the economy in Colorado is among the best of any state in the country, its housing market has been slow to recover, accord- ing to Wells Fargo's Economics Group. Commentary from the bank's economists indicates there is cause to believe the outlook for Colorado's housing market is bright, however. Colorado's unemployment rate dropped to 5.3 percent in July, and its real gross domestic product (GDP) grew at a rate of two points faster than the na- tional average in 2013. The state's construction industry reported a ANALYTICS