Using a microeconomic model of housing demand, we show that the effect of price increases on demand depends on whether a household trades up or down the property ladder. For a household that trades up the cost effect of a price increase typically outweighs the capital gains effect of such an increase. For a household that trades down the reverse might hold which can lead – in contrast to the standard model of consumer demand – to an upward sloping housing demand curve. This result is in line with the idea that housing is both a consumption and investment good and occurs even in the absence of down-payment constraints and nominal loss aversion. Nested logit regressions of residential mobility on housing capital gains support these findings.