Both the numerator and denominator of real estate capitalization rates may experience different degrees of movement as markets evolve from one phase of the cycle to another. Capitalization rate interpretations become especially difficult surrounding these turning points. The issue takes two forms. First, periods of market transformation create confusion about what cap rate to apply. Opportunities may occur at turning points to introduce substantially different numerator estimates, which results in multiple capitalization rates for the same property and thus compromises the decision rules of modern investment theory. Second, simultaneous changes in its components (i.e., riskfree rate, risk premium and expected growth rate of income) cause capitalization rates to change, sometimes in unpredictable ways. Tracking the directional pattern of capitalization rates requires an understanding of how and why the components change. This article addresses both forms of the issue.