MAYOR MARION BARRY and his wife, Effi, are finding out firsthand why the price of housing is the No. 1 issue here. Like many other renters, the Barrys have been looking for a home to buy. They are willing to pay about $100,000. That used to be a palatial price, but it is now about the average is in region. And in many popular neighborhoods, as the Barrys have learned, $100,000 won't get you very much these days. So the mayor may have to do what several members of his cabinet and thousands of his constituents have done: pay more or buy less.

Yes, there are still some housing bargains around, if you are willing to make repairs or live at an unfashionable address. But in many parts of the city, even a "handyman special" or something that "needs work" (i.e., a shell) is now commanding an outrageously inflated price.

No wonder developers are trying to build on every available lot. No wonder so many people are trying to break into real estate or redoing houses as a first or second career. No wonder non-homeowners are getting anxious, with prices continuing to soar, and are going deep into debt to buy that first house or a condominium unit, this decade's version of the "starter home." And no wonder so many families are crowding into marginal housing, or renting out illegal basement units to help keep their cash outlays down.

Why is housing inflation even worse here than in most other metropolitan areas? The experts cite several factors. In most area jurisdictions, zoning policies and/or sewer problems have slowed housing construction and driven up costs. Meanwhile, the area has attracted more than the average concentration of young adults with high incomes and small households who want to live in town and are willing -- if not always really able -- to assume large shelter costs. Recent federal pay raises have certainly contributed to this boom. So has the migration of many corporate and professional offices into the area. So have the equal credit laws which enable working women to get home financing on the same basis as similarly paid men.

Are housing prices just going to keep soaring? One might have expected more consumers to balk, as the Barrys have, at paying $100,000 or more for a decidedly unpalatial place. One might also have expected more resistance to double-digit mortgage rates -- but conventional rates are now around 11 percent or higher and people keep renting large sums anyway.

To an extent, this shows how high inflation, with no break in sight, can make consumers anxious enough to make less-than-ideal buys today because tomorrow is likely to be worse. That is both a self-fulfilling fear and a large economic problem nationwide. But there's another factor that any homebuyer can spell out almost to the penny: the tax deduction for mortgage interest. That subsidy makes more and more difference as mortgage rates and household incomes (and therefore tax brackets) rise. It dilutes the deterrent effect of rising prices and interest rates. And it enables some higher-income households to pay less -- in actual, net dollars -- than people with more modest incomes shell out for a more modest house. Thus, reducing the tax break might be the fastest way to dampen the housing market here. But if you think Congress is going to do that any time soon, you are even more optimistic than the people who keep looking for large, sound $100,000 houses on Capitol Hill.