While the Washington area's housing situation appears brighter than the nation's as a whole, this is largely due to sparks of hope in the suburbs -- with the District left deep in the shadows.

Today's high interest rates have magnified the price difference between the city's higher home prices and the lower ones in the surrounding suburbs. As a result, residential sales in the District have dropped sharply, home construction has virtually halted in the city, and renovations and conversions of apartments to condominiums have slowed considerably.

Not so long ago the District was witnessing a revival of sorts. Younger singles and couples, lured from the suburbs by the city life, were buying into the spate of newly converted condominium apartments or renovating shells in lower-priced neighborhoods.

What movement there is now seems to be going the other way, with prospective buyers having to look to the suburbs and outlying areas, particularly in Northern Virginia, to find something they can afford, housing experts say.

"We're losing people to the suburbs who are looking for homeownership," said the city's housing director, Robert Moore. "We're losing the working class people along with the middle class."

Moore, in charge of the District's programs for building and subsidizing housing, noted that the city has had trouble selling the units in its own construction and renovation projects, even though they are being offered at or below cost and are intended to be within reach of families with incomes of $18,000 to $24,000.

The housing director said the city finally was able to start selling the homes by "buying down" interest rates on mortgage money from 16 1/2 percent to 14 percent. Buying down involves paying a mortgage lender for the difference between the market rate and the rate offered to the buyer.

The city itself is the largest builder of homes in the District now, putting up about 70 percent of all new multifamily units, Moore noted.

Other builders and developers still left in the city find it more difficult to subsidize interest rates, and many have chosen instead simply not to build.

"Even if you buy down the rate to 13 percent, that's your profit, and you have to assume you have a buyer," said Joseph Horning. Horning halted construction on four houses on a Northeast Washington street last year and intends to leave them unfinished until the mortgage interest rates decline.

Michael Sumichrast, chief economist at the National Association of Home Builders, said that while building permits in the Washington area as a whole have risen about 18 percent from their dismal 1980 level, in the District the number of construction permits has dropped 74 percent. The District accounts for only 4 1/2 percent of all the new housing permits in the metropolitan area, Sumichrast said.

Sharply higher land costs in the District -- and a lack of available land -- also are primary reasons why home builders increasing go to the suburbs to start new projects, he said.

The District last year had the highest average residential lot cost per square foot -- $11.39 -- of any local jurisdiction in the country, according to the Washington-based Homer Hoyt Institute, which tracks land costs. By comparison, the next highest in the Washington area were Fairfax County, at $2.19 per square foot, and Montgomery County, at $2.18 per square foot.

District developers mainly concentrate on conversions or commercial building. While commercial development by larger firms is still doing well, even conversions to condominiums -- the strongest segment in the District home sales picture -- "have really slowed down" because of interest rates, housing director Moore said.

"A lot of developers are sitting there with units they can't sell," he said. "They're taking a beating; they're making no profit." Some building owners are selling to tenants but to do so most are having to sell at bargain prices and help with financing, Moore added.

And while it might appear that a slowdown in the high conversion rate of the past few years would be good news for renters, this isn't necessarily the case. Some owners who can't find buyers also cannot afford to keep up with rising maintenance and utility costs and are merely boarding up rental buildings, Moore said.

The supply of rental apartments has declined by 7 percent since 1978, because of conversions and the lack of new apartment building construction.

As a result, more and more families doubled up and now are trippling up, Moore said.

"Overcrowding is a major, major problem" of renters in the city, Moore said. Many of these people do not seek help, he added, because they are afraid they will be evicted if their landlords find out what they are doing.

A reduction in federal aid also could have a severe impact on District housing programs, because the city has relied heavily on subsidies from the federal government in the past few years.

Home sales in the District have declined steadily since 1978 when they stood at 6,319, according to Rufus S. Lusk & Son, Inc., which publishes District real estate statistics. That figure had dropped by more than a third to 4,066 in 1980 and was down another 14 percent in the first half of this year, the firm said.

Condominiums sales were up sharply from last year, however, as those people who did buy in the city went to smaller, more efficient units, Rufus S. Lusk III said.

James G. Banks, vice president of the Washington Board of Realtors, takes an upbeat attitude toward the current market, despite the figures. "It's not a dead market by any means, but it is down," he said.

The strongest sales continue to be west of Rock Creek Park, Banks said, and homes selling for $250,000 and up are moving faster than those in the $100,000-to-$200,000 range. This is because people who can afford the most expensive homes also can provide their own financing and don't have to worry about interest rates, he added.

Renovations in various downtown neighborhoods also have tapered off because of the interest rate rises, Banks noted. "The remodeling of houses in Shaw, LeDroit Park and east of Logan Circle has slowed down considerably," he said. "It is only a trickle of what it was two to three years ago."

One bright spot on financing for the District is the new Housing Finance Agency, which will help provide low-interest money for construction and renovation for city residents.

In December the agency plans to issue a $40 million revenue bond for multifamily housing. This will raise enough money to finance four or five planned multifamily projects for low-income persons, Moore said.

Early next year another bond issue of about $100 million will be issued to raise money for single-family homes. This money will be used to provide mortgages at subsidized interest rates of about 13 to 14 percent to "a couple thousand" city residents. These funds are designed to go mainly to lower-income, first-time home buyers, and also will give priority to those families buying into city projects, Moore said.

Real estate agents also are counting on the new All Savers certificates, passed by Congress recently and due to go into effect Oct. 1, to boost home sales. The tax-exempt certificates are intended to pull more money into the foundering savings and loan associations, which in turn are expected to use the funds to make more home loans at better rates.

In the meantime, however, "Nobody is doing much of anything" in the home-building and buyer area, Moore said.

Asked about the prospect for the coming year, Moore indicates that it depends primarily on the country's interest rates, which remain volatile and surprisingly intractable:

"Every time I say it can't get worse," he said with a sigh, "it gets worse."