Abstract: By analyzing the indicators and models commonly used to reasonably determine the housing prices, this study finds out that the standard to judge the rationality of housing prices has three angles: the residents’ disposable income, the income on investment, and the economic fundamentals. It is more reasonable to take the economic fundamentals as the criterion to determine standard housing price. This study tries to set up an individual fixed effects regression model after H-P filtering to conduct an empirical analysis of the rationality of housing prices from the two dimensions of time (1998-2010) and space (35 provincial capital cities and municipalities directly under the central government). The main conclusions are as follows: there is a stable co-integration relationship between housing prices and urban economic fundamentals; most urban housing prices are reasonable, which indicates that the continually rising housing prices in China has in fact been sustained by the rapid development of the economy and the growing urban population; China’s higher urban housing prices are mainly found in the two periods of time: from 1998 to 1999 and from 2009 to 2010, the former occurring mainly in the central and western cities, and the later occurring mainly in the eastern coastal cities, the time and space nodes of higher or lower prices are closely related to the macroeconomic policies.

Key words: rationality of housing prices; economic fundamentals; standard housing price