In 1944, ETHEL Saunders (Now Mrs. F. F. Waters) lived in a "government girls" rooming house on the corner of Cororan and 13th Street. It was considered a safe, pleasant, respectable place for a young working girl of good reputation to live.

About three months ago, her son, F. Michael Waters, a Harvard Business School graduate, bought a house a few doors down from where she once lived. Mrs Waters was, according to varying reports, "surprised," "horrified," and "a little of both."

She need not have been. The 1300 block of Corcoran today is one of the trendy places to live.

In the years between, the 1300 block of Corcoran was not always a place where you would have expected to find a young man with a master's from Harvard. The street had its downs between its ups. Many of the houses were owned by landlords who rented them but didn't repair them, resulting in a floating population too poor to afford better housing. Still, there remained a nucleus of proud property-owners and residents who kept up their houses.

Much further back, 100 years or so ago, when the house weree first built, they were the latest thing, among the first mansard roofed houses in the country. Their owners were well-to-do professional people who could afford the slate-faced mansard roofs so stylish because the design was imported from Monsieur Mansard's native France. The houses had other great selling points: proximity to downtown; handsome iron steps with ornamental balustrades; tall arched windows on the piano nobile (the main floor) to let in light; daylight ground floors locally called "English basements"; fireplaces on every floor and even, fancy that, back yards big enough for two chickens, three children, and the family wash.

The great pleasures of these old houses, no matter how decrepit some had become, were still there. Today they are being rediscovered by a grand mixture of old and young, black and white, but sadly, only those who can afford their skyrocketing prices.

About 1964, Charlotte Levine and John Gerstenfeld started renovating houses in the 1700 block of Connecticut Avenue. Soon the Corcoran Mews houses caught on, and renovation began moving eastward down the street.

Recently Rep. Stewart B. McKinney (R. COnn.) and architect Ellen Kurzman rebuilt 12 houses in the 1400 block. An entire group of new (rather blank-faced) townhouses have filled in where old houses were demolished before the fad for renovation began. Several young builders, including The Building Game Co., have redone individual houses.

The upgrading of the housing, in some cases, has resulted in difficult, homeless days for some of the people who could afford to rent the houses as slums but couldn't afford to buy or rent them as they became trendy. The dilemma concerns everyone who hopes for a city where every house is in splendid, high-tax-paying condition, but worries about those of its citizens who can't afford the high rents and high taxes that rebuilding brings. Almost all of the houses do have rental ground-floor apartments, currently leasing for about $275 a month, certainly cheaper than Capitol Hill and Georgetown.

"I don't want to see the people who've been living here for so long pushed aside," said Water, as he showed off his house the other day. "But one good thing we're seeing is the old homeowners sprucing up their own houses. The neighbors here are grand, they're always organizing crews to spruce up the vacant lots and the alleys."

Thomas P. Turchan Jr., the builder who remodeled Waters' house and 11 others in the 1300 block of Corcoran, said he had "wonderful cooperation" from long-time neighborhood residents. "They really watch our building mterials and they are quick to call the police if anyone even glances at our houses under construction. The only trouble we had wasone time when one of our foremen, not very awake one morning, came to start a job. A wino came up and asked him if he wanted to buy a gate. The foreman said a sleepy no. The wino disappeared - and then the foreman realized the house's gate was gone."

Waters, the new householder, and Turchan, the remodeler, both young (early 30s) Harvard Business School graduates, are not so far from being typical new Corcoran Street personalities.

Waters moved to Corcoran after owning an apartment in the posh Woodley Park Towers and earlier living in Columbia. "I got tired of commuting an hour from Columbia, so I moved to the city. Recently, I've been taking a good look at downtown because my family's company, F.F. Waters caterers, is starting three La Crepe restaurants. I wes really impressed with what was happening on Corcoran Street.

Some of Waters' changes were made with the help of an old friend, interior designer Jerry Coleman, who liked his ideas so much he moved into the second floor of the house, using one room for his design office and the other for his bedroom. The third-floor bathroom, adjoining Waters' own bedroom isthe most elaborately finished room in the house. Large portions of the wall are mirrored, floor to ceiling, and even a counter surface is mirrored. The other walls are painted black. It is rather difficult to figure where walls and windows and doors begin and end.

There is a 4-by-6 insulated-glass skylight , made by Reinforced Plastics on Wisconsin Avenue, above the staircase end of Waters'bedroom. The effect is emphasized by the mirrored bedframe. A jungle of plants flourishes here, thanks to the south light of the windows and the super skylight.

Waters also had design ideas for the posh bath from architect Ian Birchall, who usually works with the Building Game. Architect Mehmet Ergene did the fbasic design for the Waters house. On other houses in the block Turchan worked with architect Benjamin Spriggs, though Turchan admits he doesn't always stick to their plans.

Actually, Turchan's renovations are more restorations. He tends to put back plaster rather than expose the brick, favoring restoring the traditional features rather than remodeling for dramatic modernity. But then Turchan's rather than architect or engineering, though he worked for two years for another builder to learn the business. He says his greatest asset is his ability to put together the financing for the houses.

"I started with an investment of $52,000, and backing from my father and a friend, I then went to Government Services Saving & Loan in Chevy Chase and got $400,000 worth of mortgages on my first seven houses. I had done a thorough market study so I was able to show them that these houses are what are selling here now."

Turchan works on about three houses at the same time, in order to keep his crew of seven carpenters and eight laborers busy. He figures most renovations take him about 16 weeks. According to Turchan, he paid $25,000 each for the first six houses he bought and $40,000 each for the last group.

"Two years ago those houses sold for $3,000 each, but they were resold for $12,500, $17,000, $25,000 and then remodeled and sold by me for $94,500, The Waters house was $104,000 in February."