From the residential arbitrage equation, a rise in the down payment will reduce the price of the house, all else equal, while an increase in the real interest rate will reduce the house price, all else equal.

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According to the residential arbitrage equation, a rise in the down payment will increase the cost of the down payment, which will make the house less expensive to purchase, all else equal. Similarly, an increase in the real interest rate will increase the cost of borrowing money, which will reduce the demand for houses and thus lower the house price, all else equal. Therefore, both statements in the question are true.

From the Residential Arbitrage Equation, a Rise in the Down