Most of the time, Cap Rate compression indicates that prices in a market are rising and that investors perceive investment real estate as a low-risk, high reward asset class relative to other options.
That's horizontal stretching and compression. Let's look at horizontal stretching and compression the same way, starting with the pictures and then moving on to the actual math. Horizontal stretching means that you need a greater x -value to get any given y -value as an output of the function.
horizontal compression: An enlargement with scale factor between 0 and 1 in the direction designated as horizontal only. horizontal line equation: The equation representing a constant function - so named due to its representation on a graph.  Horizontal Shrink. Horizontal Compression.
This is simply the reduction in the implicit yield paid for real estate in the investment market. Therefore, as prices increase the inverse applies to rental yields, as they decrease. This is called yield compression (or alternatively, commonly known as capitalisation rate compression).