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This paper constitutes the first of two interrelated studies and is concerned with the relationship between house prices and transactions. Using aggregate time-series data, we find a strong relationship in Britain between the two variables, but the relationship changed during the 1990s. Transactions became much lower. We suggest that structural changes in macroeconomic relationships are increasingly likely to occur in a world of greater inequality and our results are one symptom. We argue that macroeconomic estimation needs to be complemented by careful microeconomic analysis. The second study, also appearing in this issue, therefore examines the microeconomic aspects of the issue.This paper is the first of two studies dealing with the relationship between house prices and the number of owner-occupier housing transactions. Although this question has been considered widely in the United States and, to a lesser extent, in Sweden, almost no work has been conducted in Britain. The results are broadly consistent with some U.S. studies, although the methodology is somewhat different. However, in Britain, the relationship between price movements and housing transactions changed in the early 1990s. The level of transactions has remained low by historical standards throughout the 1990s, following a boom in the second half of the 1980s. The fall in transactions is difficult to explain with conventional models, but we suggest that structural change in macroeconomic relationships is increasingly likely to occur in a world of rising inequality. Standard aggregation conditions are typically violated if incomes of households grow at varying rates.Most previous work on transactions in Britain has been descriptive, although the work of Ortalo-Magné andRady (1999, 2000) provides a notable exception. The reasons for lower levels of transactions are complex and multifaceted, but