So, either they put in a bunch of work to make the house more attractive or the overall market price rose 40%. In either case you just want to exclude the house because you don't want someone to make a profit?

I am ok with someone making a profit but not a 40% in a few years.

Yes that is probably irrational "caveman" thinking. Never said it was logical.

Better to find the cheapest house that fits your want list regardless of past ownership.

The house I bought doubled for the last owner during his 6 years here. It doubled for me in half of the time since. The past owner wasn't greedy the market moved on its own.

How do you know they didn't invest a significant amount to fix issues? What they paid for it isn't a useful measure if you don't know the condition it was in.

Comparable sales prices for recently sold similar homes would seem a better measure.

I have been looking at houses as well, and I do this too. My main reasoning though is that there is generally a lot less value left to capture in these houses because as the house trades hands, most of the 'low hanging' remodels/improvements get picked. And of course the other risk, is that there is some 'hidden' issue that is driving the turnover (noisy neighbors, under a common airplane flight path, or something like that).

Certainly those increases in price are because the person put significant time and money into improving the property. It's not any more of a "reward" than your salary is "reward".

Not certainly - it's very common for a neighborhood to shoot up in value (because of something that individual homeowners don't do, like a major employer moving in or getting successful, or a train station being built, or a nearby neighborhood getting full), and so the market value of the same home at the same condition can increase dramatically just because the neighborhood has more demand.

40% in 2-3 years is pretty unlikely, even in the hottest markets. But even still, does that mean you discontinue shopping in the neighborhood altogether? Because all the surrounding homes would have seen the same increase?

40% in 2-3 years is unlikely, but still happens. Small town + business taking off can quickly dry up all available housing.

I suspect if you look around say the Tesla Gigafactory, local housing prices had a massive spike at some point.

Yes, I said unlikely and I meant it?

Sorry, I mean yes it's uncommon, however it's also predictable. Iif you know where a new factory is going ahead of time that drastically alters the probabilities.

We bought our house, lived in it for two years, moved and rented it out for a few years, then sold it for a 40% markup. Didn't do anything special.