I wrote this about two years ago.  It won a couple of Carnivals: 

Carnival of Real Estate, hosted here on Active Rain

Carnival of Real Estate Investing, hosted by Agent Shopper

It was a lot of fun to write and a pretty good read (if I say so myself). While I've written informational blog posts, on Myspace, since 2004, I had just started to seriously blog on Active Rain, at this time in my life.  "Old-timers" in the Rain will remember this one but I thought some of the new folks might enjoy this light-hearted look at a boom town:

I talk a lot about trends in housing.  One of the ways to make money in any real estate market is to buy correctly.  How can you spot the next Aspen or Scottsdale?  Here are the six stages to watch:

1- If looking for the next hot ex-urb, look for a small town that is surrounded by natural beauty.  An old mining town in Southeastern Arizona, a former mill town on the river in Massachusetts, or an unnoticed beach town on the Gulf of Mexico.  This is the period where the real cowboys invest.  Their plan is to buy land and promote it. There is a bar and gas station in town.   There is no chamber of commerce.  Your friends will refer to the town as "bucolic".

2- Look for the artists and tradespeople.  If you see galleries and studios replacing tattoo parlors you have a good chance of making a killing in this market.  Artists like physical beauty and a sense of community. More importantly, budding artisans are VERY frugal with the dollar.  While I can't prove it with data, I just know these left-brained thinkers have a "sixth sense" about seeing the big picture.  The chamber of commerce is made up of the artists and the gas station owner, meeting at Joe's Tap Room once a month. Your friends will refer to the town as "funky" at this point.

3- Independent coffee houses and resale shops  follow the artists and it benefits everyone.  Customers need a place to eat and drink while shopping so these little businesses come in.  They take over the abandoned gas station and call their shops names like "The Shell House"  or "X-ed ON".  There is still room for upside here.  The Chamber of Commerce is hosted by the newly converted bed and breakfast in town and the mayor and police chief have joined. Your friends will call this village "quaint".

4- Starbucks comes in. They knockdown "X-ed ON" spend the money for a full environmental cleanup and relocate on the best corner in this village. Starbucks is pretty forward thinking in their site selection.  They'll take a risk on an edgy area before 7-11 and McDonalds.  This is probably a five year play at this point.  It is unlikely that you'll double your money but there is upside here.  The Chamber of Commerce meets at the Holiday Inn Express on the outskirts of town. Now, your friends will comment that this town is "charming".

5- The builders invade the area.  Little did you know that they were optioning dirt back in stage 3.  You start seeing signs and flags going up all over the place. McDonald's and  7-11's are sprouting up next to the large grocery store that was just built.  One of the art galleries gets written up in the New Yorker and the other five consider relocating.  The Chamber of Commerce is now meeting at the new housing tracts with names like "Copper Ridge" or "Miller's Crossing" and is made up of Realtors, loan officers, insurance agents, and a state senator.  Your friends are calling this area "growing" and considering a life there.

6- The buiders are now on the multi-family projects.  Target, Walmart, Home Depot and every other big box has moved into town and hosting the Chamber of Commerce meetings at their "Grand Openings".  The bed and breakfast got written up in Fromminger's, the art gallery is now an auction house next to the Tiffany's,  Joe's Tap Room is now called "Josef's Olde Taverne" and the guy who used to sell weed out of the back of his VW Camper 20 years ago is now mayor.  Your friends call this place "home"

This is when you sell.

Originally posted as The Six Stages of a Hot Market