Property Management
In Michigan, a 'CAP rate compression' in the investment market means:
ACap rates are increasing
BCap rates are decreasing (compressing) as property values rise faster than NOI, indicating lower returns for new investors✓ Correct
CCap rates are stable across the market
DMore properties are being sold at cap rates
Explanation
Cap rate compression occurs when investors accept lower yields (lower cap rates) as property values rise in a competitive market. It reflects strong demand for investment property relative to available income, common in hot Michigan markets like Ann Arbor and Grand Rapids.
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