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Every year during the second and third quarters (the "Hot season") housing markets in the UK and the US experience systematic above-trend increases in both prices and transactions. During the fourth and first quarters (the "Cold season"), house prices and transactions fall below trend. The authors propose a search-and-matching framework that sheds new light on the mechanisms governing housing market fluctuations. The model has a "Thick-market" effect that can generate substantial differences in the volume of transactions and prices across seasons, with the extent of seasonality in prices depending crucially on the bargaining power of sellers. The model can quantitatively mimic the seasonal fluctuations in transactions and prices observed in the UK and the US.
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