House prices in China recently flucate acutely and this paper focuses on real estate market mechaism by establishing models to explain this phenomena.The model includes investutility, second-hand marke,trational expectation, unrational expectation and policy impulse.This model outlines a dynamic real estate market' s mechanism.We argue that unrational expectation magnifies fluctuations of house prices. Conversely, rational expectation is the self-regulator of the real estate price.When marke't s unrational expectation dominates rational expectation, the ratchet wheel of the price fluctuating cannot stop in a shortterm.This maybe one of the essential reason for Chinese real estate price keep fluctuating acutely.