In this paper, we consider a Dynamic Stochastic General Equilibrium (DSGE) model with financial shocks, and investigate the effects of financial shocks on China’s housing price fluctuations. The result shows that the model with financial shocks better fits for China’s economic reality than the model without financial shocks, that financial shocks have significant shock effect on the housing market of China, and furthermore, the positive financial shocks decrease the investment of other sectors but increase the investment of housing sector. The result of model comparison argues that financial shocks amplify the effect of monetary policy shocks, which is the effect of accelerator. Further, the result of housing price Bayesian decomposition shows that, in the short and medium term, financial shocks is the most important driving force of housing price fluctuations, but in the long-run, monetary policy shocks is the most important factor for housing price volatility. Therefore, both monetary policy and financial policy are the important instrument of housing market regulations, governments should actively use monetary policy shocks and financial shocks to stabilize the housing market but the government should pay attention to the negative effect of financial shocks on other sectors of national economy.