Capitalization (cap) rates for each quarter are based on the appraised value of all properties that are in the NCREIF Property Index (NPI) that were revalued during the quarter. The cap rate is calculated by dividing the net operating income (NOI) for the quarter by the appraised market value of the property. The NOI is the actual accounting NOI for the property for the most recent quarter. The graph is based on a four quarter moving average of the cap rates expressed on an annual basis to smooth out quarterly variations in actual NOI. The trends in cap rates indicate how the pricing of real estate compared to its income has changed over time. A cap rate is analogous to the reciprocal of a price earnings (PE) ratio, i.e., the market value of the property divided by its NOI.