After J. Charles and Ruby Thompson moved into their new home on North Jefferson Street in Arlington 32 years ago, their children walked to school along the banks of a stream in a small wooded area at the end of the block. The Thompsons often took the same path to reach bus stops on Little Falls Road.

The woods are gone now, replaced by new houses that tower over the small ramblers lining the street. The transformation of North Jefferson's 2800 block is being repeated in other North Arlington neighborhoods where new homes are selling for up to 30 times the original prices of the older houses.

Thompson said he paid $18,950 for his three-bedroom rambler, which is now assessed for tax purposes by Arlington County at $125,000. The Thompsons believe they could sell it for $180,000.

The houses at the end of his block cost $405,000 to $545,000. As in many other areas, time and the accompanying inflation account for part of the increase in prices. In North Arlington, the increase is compounded because the little undeveloped land that remains has become expensive.

Like many older residents of North Arlington, the Thompsons have mixed feelings about the changes. The higher priced houses near their home "won't do harm to our property values," he said. But the Thompsons believe years of habit and the permission of the former owner have given North Jefferson residents a right to walk to Little Falls Road through what is now built-up land.

"Older residents are afraid {the new houses} will make their taxes go up. But also, they're pleased that house prices will go up ... for the time when they are ready to sell," said Libby Ross, an agent with Town & Country Properties Inc. and a director of the Northern Virginia Board of Realtors.

For instance, a homeowner who lives across the street from a Lorcom Lane property where four large, expensive, single-family houses are being built said, "We're delighted."

The resident, Mrs. Gilbert Corwin, said she and several neighbors opposed town house and cluster housing development of the type that has occurred in many areas of the county. They feared they would get this kind of lower-cost construction in their neighborhood rather than the kind of homes being built now.

Most of the houses lining North Arlington's streets were built in the 1930s, '40s and '50s. Many homeowners are families who moved in at the end of World War II and helped launch the baby boom. The children have grown up and the middle-income, predominantly white couples are middle-aged and older.

Dominating the newest wave of buyers are younger two-income families attracted by the quiet streets and the area's proximity to downtown Washington.

Of the four new homes facing the cul de sac on North Jefferson, where the Thompsons live, three were bought by two-lawyer couples, said builder Douglas Stein. Stein's company built three of the houses and two others on Little Falls Road behind them.

"Arlington is an established neighborhood where you can build more expensive houses beside less expensive houses," according to Stein. "Virtually no new houses are being built because there's no land" available, he said.

Ross said that in many cases, "the people who are buying these half-a-million-dollar houses are people who already live in Arlington; often they've grown up here and they're accustomed to Arlington's convenience."

The cost of land has doubled in the last five or six years because of its scarcity and the demand for houses in the area, according to several builders and real estate sales agents.

Lawyer Bill Moore, who, with a partner, builds a few houses a year, said land costs vary widely, depending on size, location and other factors. An 8,000-square-foot lot in North Arlington costs about $90,000 in many cases, he said. "More of the lots now are rougher, and have topography and sewer problems," he said. "All the easy lots are gone."

One of the two Victorian-style houses Moore and his partner, Edward Yacoub, are building on Harrison Street was sold before it was built, Moore said. The four-bedroom homes are priced at $325,000.

The scarcity of available land and the growing demand for housing in Arlington County are fostering what is known as "in-fill" building throughout Arlington, said John G. Milliken, vice chairman of the Arlington County Board.

Ross said when agents are asked to find land for prospective builders, "the lots we come up with are usually someone's front yard or side yard."

The four homes on Lorcom Lane across the street from Corwin are examples of this in-fill building. Gary Kolker, a former Arlington County assistant commonwealth's attorney who became a builder about five years ago, is constructing them on a 1 1/3-acre plot surrounding a two-story brick home built in 1941. After he purchased the property from the heirs of the former owner, Kolker divided it into five lots.

The four- and five-bedroom homes, priced from $575,000 to $675,000, are on lots ranging from 8,006 square feet to 16,278 square feet, within the neighborhood's 8,000-square-foot minimum lot size.

Allen White, a retired Immigration and Naturalization Service officer, bought the old house on the property from Kolker. He said he paid $325,000 for the five-bedroom home and was offered $400,000 before he moved in.

"We liked this house. We saw it before any construction work was started" on the rest of the property, he said. The Whites moved to Arlington from Manassas because "it was suicidal to commute on Rte. 66."