A STORY about port security on this page yesterday is reason No. 5 that Maryland home prices are going to keep rising.

To stop terrorists, the Transportation Department is giving Maryland $3.76 million as part of a package to add guards and buy patrol boats and cargo-screening hardware.

By itself, the grant will do little for Maryland's economy, but it is part of a confluence of factors that I believe will conjure home-price inflation in the next five years like we haven't seen since the 1980s, with multiyear, double-digit percentage pops. Home prices were already rising at a pretty good clip, but they look ready to go even higher.

Maryland has always crested and sunk with the tides of federal spending, and so have its housing values, which generally shadow the overall economy.

After something of a drought for most of the 1990s, federal spending in Maryland - for Social Security salaries, medical research projects, reconnaissance drone planes and so forth - is again rising smartly and figures to keep increasing as long as the war on terrorism is waged in earnest.

Federal spending in Maryland jumped by $6 billion, or 15 percent, from 1999 to last year, doubling the rate of growth of the previous five years. In a state with a $180 billion economy, $6 billion matters.

The money would help float home prices in any event, but other forces are pushing in the same direction. Perhaps the most important is:

Smart Growth. This is the name for Gov. Parris N. Glendening's plan to steer development into parts of Maryland that already have schools and roads. If it works, it will slow sprawl, preserve green space and save money on public works. It will also crimp the housing supply and drive up prices.

Maryland's Smart Growth cap has numerous leaks, as suggested by a study conducted last year by 1,000 Friends of Maryland, a private anti-sprawl group, and there is little evidence that housing development has been hindered.

But the concept of denying state infrastructure money to projects outside the built-up "priority funding areas" is a powerful one, particularly because the impact fees that many counties charge developers don't begin to cover the cost of the growth to government.

If the next governor is serious about Smart Growth, the inventory of buildable Maryland home lots will start to get used up. In Portland, Ore., an often-used example of what happens when government stops development in the name of environment, growth limits helped push the price of an acre of developable land from $20,000 in 1990 to $200,000 today.

While growth in housing might slow ...

Maryland's population will grow. The Census Bureau projects that the number of Marylanders will increase by almost a half-million from 2000 to 2010. They gotta live somewhere. You know what happens when demand rises and supply doesn't.

The population projections could be conservative, because a decade of relatively moderate growth has positioned Maryland to compete more favorably for jobs and people.

In particular, the state will benefit from the fact that:

Northern Virginia is full. Population pressures and traffic problems north of the Potomac are trifling compared with what's going on in Arlington, Fairfax and environs, which boomed in the 1990s.

As a result, Northern Virginia has lost its low-cost edge. The Internet bust hasn't relieved the gridlock nightmare, and the area is either going to lose $600 million in state road-construction funds or have to raise taxes to make up the difference.

Either way, the winner is Maryland, the only alternative if you want to be close Washington without being in it. Northern Virginia's problems help account for the fact that:

Maryland newcomers come from states with much higher housing costs. This means they often bid home prices higher than what the locals are used to. Even offers far above the asking price can seem cheap to somebody from Boston or Falls Church.

In 2000, for the first time in five years, Maryland enjoyed a net increase in interstate migration instead of losing people on balance to the rest of the nation, according to the state Planning Department.

More Marylanders are still moving to Virginia than vice versa, but the losses are down sharply. And Maryland has experienced substantial net population gains from New Jersey, Massachusetts, New York, California and Hawaii, all of which have sky-high home prices.

Maryland booked a net population gain from Western states in 2000 for the first time since 1989. A home that costs $500,000 in Walnut Creek, Calif., can be had in Howard County for $227,000, according to Coldwell Banker.

Many analysts are talking about a U.S. housing bubble that will suffer the same fate as the stock market. This could be true of places such as Oregon, where low interest rates have fueled a home-buying binge that the slumping local economy won't be able to sustain.

But there's no bubble in Maryland, where recent single-family home-price changes, despite healthy appreciation, have been half the rates of increase in Massachusetts and California, according to Freddie Mac.

Maryland is the third-richest state in the country, according to the latest census results. But its home prices are far below those of less wealthy places such as Colorado.

Seems as if there's some upside potential.