Blooming azaleas and dogwoods are lighting up this area's still-throbbing home market.

Despite average annual price increases of 18 percent for all new dwellings-from small condo apartments through variously priced town houses through single-family houmes averaging over $85,000 to minimansions in the $500,000 range-the areawide appetite for home ownership has been awesome.

This new home-buying surge hit a peak of 1,994 sales in March, according to Housing Data Reports. Renay Regardie, president of the marketing research firm said that frantic level of new-home pruchases had been apprroached previously in the sping of 1973. Meanwhile, sale of existing homes also have been exceptionally strong, although sometimes erratic from month to month, for more than two years.

Seasoned housing observers recognize that the overall ebullience of the housing market hereabouts has persisted despite rising prices and an upward movement in mortgage interest rates to record levels. Those same observers also remember the sudden and mordant slump that hit all area housing markets in the early summer of 1973.

That slump was caused by an almost total drying up of available mortgage money. Despite recored interest rates (even FHA-VA rates moved to 10 percent two weeks ago and most conventional loans now are in the 10 1/2-plusa range), mortgage money is generally available in this area. However, some lenders are temporarily out of money for new loans after savings outflows and sporadic drains caused by closing on previously committed loans.

So it is not surprising that some high-level building and financing executives are skittish, if not outright bearish, on prospects for home financing. Speaking recently in Houston, Oakley Hunter of the powerful Federal National Mortgage Association warned that an arbitrary, federally initiated curtailment of credit to housing as a means of controlling inflation "could tip the scales toward a full-fledged recession."

Hunter, in agreement with others in home building, financing and selling, said that "housing's depression led the economy into its deepest recession since the 1930s" five years ago when the total housing industry was unable to compete for needed capital. He also recalled that the dismal 1974 housing market was following by a resurgent demand for ownership that "undoubtedly had driven housing prices higher in recent years than they would otherwise have gone."

But that really doesn't tell it all about housing's vitality in 1977, 1978 and thus far into 1979. Here and elsewhere in the nation, the market has been hyped by three major factors:

An increasing number of two-in-come young married couples and many more single persons (including many women) who have decided to use their loan eligibility to buy rather than rent.

A willingness of those people and many others of all ages to channel more than the usual 25 percent of spendable income into monthly housing payments. Generally, that decision is being made on the recognition that home ownership is both a hedge against inflation and a premium investment in today's total financial market.

An overall surging level of affluence that finds persons of all ages being able to buy semiluxurious condominium apartments, town houses or single-family houses in price brackets that shake up those of us who remember that buying a three-bedroom or four-bedroom new houses priced around $30,000 was a major move for most families only 20 years ago. That was when mortgage interest rates were around 6 percent!

This area seems to be rivalled for housing mania only by Southern California, Houston-dallas, Chicago and Seattle, and the trend to condominium conversions of existing rental units has been exceptionally strong here. So far, the market has been there, but a glut could develop as plans for conversions of several high-dollar rental complexes intown and nearby move into the selling stage. In recent months, sales have been strong at most condominium and town house communities, whereas sales at some $100,000-plus single-house subdivisions have been spotty.

Thus, this year could be one of crisis for housing. Many new subdivisions of single-family houses are available throughtout the area and no shortage of desirable resale houses has developed. But the somewhat enigmatic presence of new buyers keeps the market moving as the pattern of moving up to something bigger and better persists among many owners. Modest population growth helps as does the brisk pace of household formations.

In this area, there's another significant trend: the emergence of new communities for adults. For more than a decade, Rossmoor has had a lock on that market-persons over 48 and with no children. Now there's Crestwood Village with a line of semidetached, moderately priced houses on the southwestern tip of Frederick, Md., and Heritage Harbor with both one-story single-family houses mostly priced from $80,000, plus some semidetached dwellings, near Annapolis. Both Crestwood and Heritage have long-range plans for more than 1,400 dwellings. And a neighborhood for mature adults also is being set up at the Fort Lincoln new town in the District.

But the unrestricted single-family house and town house are the continuing staples of this area's new housing market. Columbia, Reston, Montgomery Village, St. Charles, Lake, Ridge, Burke Centre, Fort Lincoln, Northamptom and varying versions of new towns still are being developed. Their biggest sellers are single-family houses and "towns" but the condo apartment or cluster house is becoming an increasing part of the market in the lower price range.

Meanwhile, major volume builders-Ryan, U.S. Home, Ryland, Pulte, Washington Homes, Richmarr, Ward Development, Edw. R. Carr, Kettler Brothers, Yeonas, Artery, Hylton and others-continue to offer houses in small medium and large subdivisions. The prices of most single-family houses average $90,000 and for most town houses are in the $50,000 to $80,000 range.

Nonetheless, the range of available new houses in more than 500 new locations generally begins about $40,000 for small condominiums to more than $175,000 for some singles and poshy town houses. For instance, brothers Joseph and Lawrence Horning now a have small group of semidetached houses from $85,000 at Michigan Park North inside the District line, and a family group headed by Milton Peterson has the new Madison at McLean town houses sold out (up to $183,000) ahead of construction in N. Virginia.

Watergate at Landmark has been a consistent strong seller of high-rise condominium apartments along with the Chalres E. Smith firm's skyline City at Baileys Crossroads. Strong sales also are reported at the 1,200-unit, five-building Rotonda complex at Tysons Corner and the converted 1,800-unit Parkfairfax, which followed its neighboring Fairlington (now sold out) as a heavy seller.

Meanwhile, town house clusters and small groups of single-family houses are developed and sold in Alexandria, inside the District, in Falls Church, in Bethesda, in Silver Spring-almost wherever the location and the zoning are available. At the high end of the price ranges are three groups of new "towns" and cluster homes on the Glover-foxhall tract in upper Northwest and the big Forest Hills' town houses across from the Army-Navy Country Club in South Arlington.

With gasoline prices still soaring, home shoppers are more conscious of long commutes. More selective house shopping can be expected as buyers seek sites closer to their job sites. This also could initiate some buying and selling to make those changes.

As this sping marketing season moves into full swing, shoppers are aware of the high prices. They know that Washington area houses, both new and resale, bring more dollars than almost anywhere else in the nation. Even the high interest rates fail to be turn-off because buyers understand that a dollar spent for mortgage interest may well be only 60 cents after income tax deductions for interest and taxes.

New forms of financing are available. Locally initiated mortgages (for lower-income persons) using tax-exempt bonds have stirred reaction from conventional lending sources and even the Treasury Department, which senses the loss of tax income. Private mortgage insurance permits conventional loans to be offered with only 5 percent down payments if the buyer can handle the larger monthly repayments. FHA has graduated-payment mortgages, and there is a move afoot to make those early payments even smaller. Of course, the VA always has had the advantage of requiring no down payment from veterans.

In terms of analyzing area growth and new housing starts, Fairfax County has taken the lead in recent years. Figures tabulated by William Young of the National Association of Home Builders showed that Fairfax building permits last year accounted for 8,509 of the 23,945 residential permits in the total metro area. The Fairfax total easily eclipsed the sum of permits in both Montgomery and Prince George's counties, which had been the leading growth areas in the 1960s.

Realtor Joanna Hirst, who follows closely the statistics in Fairfax County, insists that her home county will continue to provide a "stable, continued availablity of sewer capacity and other basis utilities." And Montgomery County builders still are fighting what many regard as the phantom of non-availability of sewage treatment potential for new growth. But two-acre zoning on septic-tank areas of upper Potomac still produces a large quota of homes priced over $200,000.

The average price for new homes in this area was $77,200 in 1978 compared with the national average of $55,500. Average resales in this area were slightly over $80,000, far above the national level of $55,500. Land, construction and even financing costs, to a slight degree, are higher here than in most other metropolitan areas. And turnover-that's simply buying and selling-is considerably more active here.

Undeniably, housing costs here are extremely high. But so are the incomes of area residents. And so is the rate of residential property appreciation (increase in value). Since 1963, most homes across the nation have been increasing in market value (what you can get if the property is sold) at a rate of 5 percent annually on a compounded basis. In this area, that figure has been well above average in the 1970s. Annual appreciation of 10 to 20 percent no longer is unusual for a well-located property.

An annual appreciation of 8 percent is considered conservative here. That means the house you bought eight years ago for $50,000 should bring at least $100,000 in today's market.

More staggering, perhaps, is the extension of the 8 percent rule of thumb. The house you buy for $100,000 this year may be selling for as much as $200,000 in 1987. That's another indication that housing costs have been in the forefront of inflationary trends and that they are likely to continue into the next decade when household formations are expected to be double the hot pace of the 1970s.

Of course, there has to be at least one caveat. If there's a full-hit recession with unemployment, salary and wage cuts and even lower food prices, housing will follow the trend. Household formations will be constricted, and persons and families may "double up" to save both money on housing, financing and utilities.

However, the conventional wisdom still persists that this area beats all others in being recession-proof. There was some levelling of housing prices in the doldrums of 1973-74 but little downward movement. And after that lull, the inlationary Housing Machine revved up and hit new heights. CAPTION: Map, Shows current D.C. Construction or condominium conversion activity for (1) condominium apartments, (2) town houses and condominiums, (3) garden apartment condominiums, (4) Town houses and (5) single-family houses. By John Pack for The Washington Post; Picture 1, Home construction at University Park in Upper Northeast as seen from the Taylor Street Bridge. By Margaret Thomas-The Washington Post; Picture 2, New Washington homes: Michigan Park North houses on Gallatin near 14th Street just inside the District line. By James Parcell-The Washington Post