At the time of its groundbreaking in 1980, the Hillandale development was billed as one of Washington's most luxurious and trendy new addresses. Prices ranged from $275,000 to $400,000 for the 266 homes planned for the 42-acre site in western Georgetown.
But four years later, with only 55 town houses completed, Hillandale was bankrupt -- a victim of the interest rate crunch of the early 1980s and a keenly competitive market for expensive homes in the Washington area.
Today, however, Hillandale is back, bucking history with new developers and even higher prices: Town houses now start at $400,000 and prices for detached homes, 24 of which are to be built this year, will soar above $800,000.
"I don't think we are afraid of the problems from before," said Michael Marrs, a vice president with Kettler Bros., developers of the development, which is on land once owned by the Archibald family, some of whom were among the heirs to the Standard Oil fortune. "We just feel the market is here."
Hillandale, attracting buyers with annual incomes between $150,000 and $600,000, is not alone in capturing a growing niche in the metropolitan area's luxury-home market. In the District and several other communities, more builders are finding buyers eager to plunk down from $500,000 to more than $2 million for not-so-humble abodes. Moreover, many of these buyers -- up to 50 percent in some posh developments -- pay cash for their high-priced homes.
While expensive, elegant homes are nothing new to Washington, the number of luxury-housing developments, subdivisions of 20 to 100 or more so-called tract mansions with prices approaching the $1 million mark, has sharply increased in the past several years.
In addition, many custom home builders who construct one or two houses at a time are no longer waiting to obtain a buyer before starting. For example, one Great Falls builder is finishing a $1.1 million house without a buyer in sight. He and others are building on speculation -- a practice generally left to developers of large-scale, moderately priced housing subdivisions and downtown Washington office complexes.
Because of relatively low interest rates on construction loans and an uncertain economic future, "it's cheaper to build a house today and let it sit empty for six months than to wait," said Toby Rhodes, manager of the Potomac office for Shannon & Luchs Co., a large real estate firm.
Developers and other real estate experts attribute the expansion of the tract mansion market to several factors, including the overall drop in mortgage interest rates in the past 18 months. During that period, home values in some areas here and nationwide have risen 25 to 30 percent, creating equity in houses that allows some homeowners to move up to new, higher-priced homes.
The luxury-home market here has also been expanded by the influx in recent years of new companies -- along with their well-paid corporate executives -- to the burgeoning employment centers of Tysons Corner and the I-270 corridor.
"It's a function of the growth of this region," said Raymond LaPlaca, president of the Suburban Maryland Building Industry Association.
The tax revision legislation enacted last year by Congress, which took away many traditional tax shelters, is also influencing luxury home sales.
"The bottom line is real simple," Rhodes said. "The only real shelter left for a high six-figure individual is a home."
But it is the dwindling supply of buildable land in the popular, affluent communities of Northwest Washington and nearby towns such as Potomac and McLean that has created a surge of tract-mansion developments.
Such a shortfall has pushed land prices up sharply. One Potomac builder last week received a contract price of $575,000 for a two-acre vacant plot, an amount that stunned even seasoned real estate agents. Consequently, according to industry experts, higher-priced homes are a natural outgrowth of rising land costs.
At Foxhall Crescents, a minimansion subdivision off Foxhall Road in Northwest, prices range between $700,000 and $800,000 for homes sitting snugly on one-fifth of an acre. Buyers wanting bigger yards can -- for an extra $200,000 -- increase the size of their lot to a half acre.
Carved out of the estate of former vice president Nelson A. Rockefeller, the homes "provide Washington's elite with the elegance and luxury they deserve," according to a sales brochure. Amenities in the 5,600-square-foot homes include curved staircases, libraries, 35-foot living rooms, maid's quarters off the garage, marble baths with whirlpool jets, walk-in closets in the master bedrooms, and elevators -- at an additional $25,000 apiece.
Foxhall Crescents' residents are "very substantial people," according to Dagmar Burton, sales manager for the subdivision, being developed by the Alan I. Kay Co., which purchased the former Rockefeller parcel in 1979 for $5 million.
Burton said the development's buyers earn "at least $300,000 per year" and include top executives of corporations, stock brokers and bankers. More than half of the current 26 owners at the 32-lot development paid for their upscale homes with cash. "They are beyond the young doctor and lawyer stage," she said.
"They never liked it out there in the suburbs in the first place," said Burton, echoing the sales pitch used by many real estate agents in the city. "I perceive that half of Potomac wants to be here, but they're just waiting for Junior to go off to college before moving back to the city."
But in Potomac, where expensive homes are generally being built on lots larger than those found in the upscale enclaves in the District, builders are hardly complaining of an exodus to the city.
At the Teversall subdivision off River Road, 70 of the 75 lots have been sold since the project, being built by the William L. Berry Co., began in late 1985. Buyers at Teversall can choose from eight floor plans for contemporary and traditionally designed homes, which range in price from $644,000 to $749,000. After including the cost of options, most buyers end up settling on homes in the $800,000 range.
Berry, a Montgomery and Fairfax county builder, said he began constructing his highest-priced homes at Teversall "because we thought there was a void out there. At the time, there were only custom home builders in Potomac."
Berry said buyers are attracted to Teversall "because it looks like a custom-built neighborhood," and is surrounded by homes with values exceeding $1.5 million. Nearby homeowners include such celebrities as boxer Sugar Ray Leonard and actor Sylvester Stallone.
Berry said those who can afford one of his $800,000 homes in Teversall "are buying its location, the design and size of the homes, and a two-acre lot in Potomac, which in itself is worth a couple of hundred thousand dollars."
Pat Kalinsky, marketing director for the Teversall project, said buyers at the tract mansion development "have moved into their dream house." For $800,000, buyers get a 4,000-square-foot house, with features including spacious rooms, expensive appliances, two-story family rooms, oversized bathtubs, hot tubs off the master bedroom and private maid quarters, which Kalinsky said, "is an important factor for this area."
Most of the Teversall buyers, ranging in age from late 20s to 50s, work in Montgomery County and include builders, developers, doctors and lawyers. About 20 percent paid cash for their homes, Kalinsky said.