From January through July, 355 homes sold in the $1 million-to-$2 million range, compared with 307 over the same period last year -- an increase of just under 16 percent.

"Many of the builders have come off the sidelines after five years to take on land acquisitions," said Eric Murtagh, who heads up the New Luxury Homes Division of Evers & Co. "Many of the speculative builders have been identifying properties suitable for new home development. It will affect supply by next summer."

These areas include downtown Bethesda, Friendship Heights, Tenleytown and the outer neighborhoods along River Road and Democracy Boulevard, Murtagh said. The Wisconsin Avenue and the Connecticut Avenue corridor also are "safe bets" that offer a nice mix of art, entertainment, retail and transportation.

Builders have had it tough for five years, said Murtagh, but they are willing to come back to the market even if they do not have buyer contracts.