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Meet the researcher: Pedro Gete & Athena Tsouderou

Posted on April 23, 2019

Selected for the TFI long-term research grant: Pedro Gete and Athena Tsouderou! The focus of their research is analyzing how the Financial Crisis of 2008 affected the determinants of housing tenure choice in Europe. More specifically, how has it affected homeownership and the demand for mortgages? Read more about the project and the researcher’s motivation for conducting this thought-provoking research.

The goal of our research is to study homeownership and the demand for mortgages after the 2008 Financial Crisis. These are important variables from an economic policy perspective and for the banking industry in particular. Anecdotal evidence suggests a structural break: the Great Recession seems to have led to a permanent drop in the demand for homeownership and mortgage products. However, the academic literature is scarce and focused on the U.S. We do not have systematic work showing such a drop and analyzing its determinants. In this paper we will fill this gap.

First, we will study differences and changes in the demand for homeownership and mortgage credit across European countries. Our goal will be to document and measure in a systematic way to identify what is new, what has changed. We will control for differences across demographic groups and for geographical factors. In other words, we will check whether the changes are common across population groups or specific to some of them.

Second, we will investigate which factors account for the observed changes. That is, we will explore the causality of the changes. Tentative candidates are: 1) changes in preferences towards homeownership. For example, the scars of the crisis may have led some groups of households to change their behaviour in a permanent or temporary way; 2) Changes in the supply of mortgage credit. For example, the post-crisis regulatory environment has led to different lending standards and mortgage products; 3) Changes in the supply of housing. For example, the Great Recession has transformed housing into a global asset class and households face now a higher competition from investors when buying a house.

We will use state-of-the-art identification techniques and data from several sources. For example, we will analyse the European household surveys run by the ECB, the ING International Surveys and proprietary credit data from ING. Our goal is to achieve a clear picture of the situation. And to think about potential implications for the housing and mortgage industries, as well as for policy makers.

“Our work will provide a better understanding of household's housing and mortgage choices. We will analyse data from multiple sources to infer what are the new patterns on homeownership and demand for mortgages.”

What was your motivation to apply for the Think Forward Initiative research grant?

The Think Forward Initiative (TFI) is a great initiative that supports research that contributes to our understanding of households’ financial decisions. This is exactly our main area of research. Also, TFI's financial support is very helpful for our project. The TFI grant allows us to access new unexplored data which could lead to very interesting findings. Moreover, the TFI also provides channels to disseminate research through blogs and summits. This will make our research more accessible to the public. It gives us greater impact and visibility. Finally, we love the opportunity to do work that is relevant for the financial institutions and policymakers’ decisions. These interactions and feedback will lead to much better research and social outcomes.

How do you expect that your research will contribute to people’s financial well-being?

To improve people’s financial well-being we need good economic policies and suitable financial products from the financial industry. But, to design such policies and products, first we need to understand what households are doing and why. What are household's needs.

Our work will provide a better understanding of household's housing and mortgage choices. We will analyse data from multiple sources to infer what are the new patterns on homeownership and demand for mortgages. We will look for cross-sectional differences and study what are their causes. Better data analysis will lead to better analysis. Thus, our results will potentially have major implication for the housing and mortgage industries, as well as for policy makers.

Pedro Gete is Associate Professor and Chair of the Finance Department at IE University in Spain. He holds a PhD and MA in Economics from the University of Chicago, and a J.D. and a B.A. from Universidad Carlos III. He previously worked at Georgetown University. He has taught at all previous institutions and at Chicago Booth. His research focuses on credit markets with applications to topics including real estate, finance, international economics and macroeconomics. His work has been published in the leading academic journals and he has presented at major conferences and policy institutions.

Athena Tsouderou is a PhD student in Business Studies at IE University. She has a Master in Actuarial Science from Columbia University as well as a Master in Research from IE University. Her research focuses on housing, credit markets and household finance. Before her doctoral studies she worked as an Actuary at Willis Towers Watson for four years.