When Emily Mills and her husband, Kevin, decided to move to Annapolis, picking a neighborhood in Maryland's capital and sailing wonderland wasn't difficult.

"A friend of ours told us Murray Hill is the only place to live," said Emily Mills, 35, while meticulously painting a white picket fence that lines her shady yard. "We didn't look anywhere else."

Now, nine years after paying $210,000 for a 1940s dwelling within sight of Spa Creek, the family remains tied to the rhythms of water and land. "We have wonderful neighbors; I would have to say I love them all," said Mills, a mother of two and a fused glass artist.

Almost everything in the compact Colonial city of 35,000 residents is within easy walking distance, she said. Her neighborhood is outside the historic district but close to the restaurants and shops of West Street, as well as City Dock, the central gathering point for tourists from all over the world.

"It's walkable to downtown and to the water. That's what sells," said Gaye Meekins, a real estate agent with Long & Foster. "And some of the homes are over 100 years old, so they have a different look."

Murray Hill stretches west from the core of Annapolis, along Spa Creek. With Amos Garrett Boulevard as the hub, streets including Constitution, Monticello and Archwood feature varied architecture and neatly manicured lawns. In recent years, a Spanish-speaking church was demolished to make way for the construction of several custom homes. The 3,075-square-foot houses, a five-minute walk to the waterfront at Amos Garrett Park, feature nine-foot ceilings, hardwood floors, three-piece crown moldings and price tags of around $970,000. Waterfront houses are going for upward of $2 million.

Acton's Landing, a mix of single-family houses, townhouses and condominiums, is taking shape on a five-acre parcel where the Anne Arundel County Medical Center once stood. The hospital has since moved near Annapolis Mall. The new development will include extensive streetscape and a new waterfront park.

"Murray Hill in Annapolis: Centennial 1890-1990," a short publication issued by the local residents association, says the community traces its roots to 1651, when a certificate of survey was issued to Richard Acton, a carpenter. He bought 100 acres on the north side of what was then Todd's or Acton's Creek, now Spa Creek. In 1668, Gov. Charles Calvert designated Acton's parcel as a legal port of entry for the province. Across the quiet inlet, a port known as Anne Arundell Towne or Arundelton was sprouting. A quarter-century later, the capital shifted there from St. Mary's City. Annapolis was born.

Murray Hill draws its name from James Murray, a member of a large Scottish family who left Great Britain for political reasons in the early 18th century, according to the book. His mother hailed from a part of the family that moved to Cambridge, on the Eastern Shore; his father settled in Chestertown via Barbados. From his Annapolis base, Murray served as Maryland's land commissioner, its secretary of state and as a U.S. congressman.

While waterfront is a major lure these days, being on the water was not always a priority, said Richard Israel, a former president of the residents association. "One of the curious things about life in Annapolis was until about 50 years ago, people didn't want to be near the water. It was smelly," he said.

Historically, the prized location for those with money, added the retired lawyer for the state attorney general's office, "was up on the hill, not down on the water."

In recent years, housing around Annapolis has become so expensive, he said, that St. John's College has set up a committee to identify reasonably priced homes for its professors.

At lunchtime, David Lytwynec strolls the short distance from his office to Amos Garrett Park to savor nature's bounty. "On any given day," declared the telecommunications engineer, looking across at the bobbing sailboats on Spa Creek, "I can see osprey hunting in pairs on the water. And great blue heron. It's a neat place to see birds." Lytwynec, who lives outside Baltimore, said he would like to live in Murray Hill -- if he could afford it.

"There's a lot of rehab going on," he added, pointing to a rambling house with a bright red roof. "It's absolutely gorgeous."

Like many Annapolis residents, Kevin Mills, 44, an engineer in Crystal City, faces a long commute to his job. To avoid westbound Route 50, which clogs early, he is out the door from 4:30 a.m. to 5 a.m., returning home most days by 4 p.m. For relaxation, the family keeps a home on the water in Southern Maryland.

"We go there on weekends when it gets too crowded in Annapolis," Emily Mills said.

The city, with its salty sea breezes, certainly attracts crowds. Along with annual sailboat and powerboat shows, January brings state lawmakers who descend to debate issues during the 90-day session of the General Assembly. Come June, Commissioning Week at the U.S. Naval Academy brings hordes of beaming parents; this year, President Bush delivered the featured address at graduation.

Bonnie Gale adds one more regular event to her calendar. On many autumn Saturdays, when she wants to leave her Murray Hill home to go grocery shopping across town, she has learned to wait. "I just know I don't go when the midshipmen are marching to football games [at Navy-Marine Corps Stadium] from the Naval Academy."

Her husband, Hamilton, who owns a boat towing business (motto: "We don't charge an arm and a leg, we just want your tows"), said his grandparents settled in Murray Hill in 1904. Whenever his grandmother would head downtown to shop, she would be gone for three hours, "because she knew everybody" and would stop and chat.

"She was also proud of the fact that she was the first woman driver in Annapolis. She would drive all day to avoid a penny parking meter," he added with a laugh.

Standing in cutoffs under the shade of an 80-foot oak tree in his front yard, Gale grumbled that he is paying $12,000 a year in taxes to the city and county. "Sooner or later, the taxes are going to drive us out of here," he said.

In 1998, Denise Worthen and her husband moved from Bowie to Murray Hill. Life in Bowie, which she described as "the very essence of a family neighborhood," left her not knowing many of her neighbors. "In Murray Hill, we are closer to our neighbors both physically and emotionally," said Worthen, who, like her husband, works as a contractor at Goddard Space Flight Center in Greenbelt.

"I can't tell you how many times the four or five families at the end of my street end up talking out on the sidewalk. Everyone's kids are running around and the dogs are barking. It's just a normal summer evening spent socializing with your neighbors," she said.

"From my perspective, Murray Hill sits at the 'sweet spot' in Annapolis. We are close to the historic district, but not too close. . . . We sit on Spa Creek, and even if you aren't lucky enough to live on the water, we have several small waterfront parks where you can sit or even launch a kayak."

One recent afternoon, Agnes Mamzer and Regine Haas, au pairs from Germany, relaxed on a beach towel in the front yard of a house on Monticello Avenue. "I like the neighbors and the water," said Mamzer, 22. "I don't live close to the water in Germany."

Haas, 21, a graduate of Anne Arundel Community College, said: "I like the water, too, the people and the seafood. But I have to go home in October," she said, sighing.

Waterfront homes along Spa Creek sell for millions now. David Lytwynec likes to stroll down to Amos Garrett Park to see the boats."We didn't look anywhere else," says nine-year Murray Hill resident Emily Mills.