In contemporary capitalist economies, housing is not only a shelter that satisfies a basic human need. It is also a commodity produced for exchange in markets and an asset for storing and enhancing wealth. As such, its mispricing can have repercussions for individuals, firms, industries, nationwide economies, and for the global economy. The purpose of this dissertation is to explore the price dynamics of this complex entity in an analytically tractable framework. In agreement with a recent but growing body of literature, the study shares the view that incorporating insights from behavioral economics can be valuable in such an undertaking. To support this statement, the dissertation first presents a theoretical framework that situates differing views on house prices in a wider split between neoclassical and behavioral economists. Then, the study proposes an agent-based simulation by extending a prominent real estate market model known as the Four Quadrant Model. Specifically, the extended model seeks to explore the extent to which behavioral heterogeneity and dynamic market behavior enhance the existing explanations of house price dynamics. The dissertation validates the proposed model by running a set of experiments with empirical data obtained from Istanbul’s housing market between January 2010 and September 2015. The results suggest that both the inclusion of behavioral heterogeneity and dynamic behavior are relevant in the exploration of house price dynamics. Based on the theoretical framework and the simulation results, the dissertation calls for action on the part of policy makers, researchers, and members of civic and professional organizations.