Engineer Richard A. Huxta, one of Loudoun County's newest residents, lives in a neighborhood virtually without neighbors.

His family shares one of Loudoun's many new subdivisions with just one other family, three vacant houses and 17 vacant lots. Until recently, Huxta also worked in near-isolation. He and his seven employees were among the only tenants at a five-building Loudoun office park.

Loudoun County was the next frontier for Washington area developers and builders; they envisioned its rural emptiness rapidly would become home to new businesses and legions of workers.

During the 1980s, as development spilled westward from Fairfax County, Loudoun's population soared by nearly 50 percent, employment more than doubled and the housing stock grew by 68 percent. But the developers had been banking on even more growth.

Now the landscape is dotted with pockets of desolate new development. Where farms, fields and forests once graced the countryside, silent buildings and seldom-traveled access roads have yet to demonstrate a reason for being.

More than a third of Loudoun's commercial space is unoccupied. The 35 percent vacancy rate is the highest for any major jurisdiction in the Washington area and more than double the area's overall rate of 16 percent, according to Realty Information Group, a McLean research firm.

Millions of dollars -- money that might have been put to more productive use -- are tied up in vacant buildings and undeveloped tracts of land. Jobs are being eliminated as the housing and commercial building industries sharply retreat.

Banks, savings and loan institutions, pension funds and life insurance companies that staked money on Loudoun real estate have been weakened; many of the lenders are reporting record losses.

And the Loudoun County government, which has grown dependent on an inflated real estate tax base, is facing a fiscal crunch as the exaggeration seeps out of its property assessments.

Partly because of declining assessments, local tax revenue could fall short of the needed $152 million by as much as $34 million in the next budget year, county officials said. That could result in layoffs of county government employees and cuts in spending on schools and social programs.

"The citizens are going to be shocked," said Betsey Brown, a member of the Loudoun County Board of Supervisors. "We could be faced with having to cut all but the most essential services."

Loudoun County has become a symbol of the power of development to overshoot the mark, particularly in the go-for-broke, easy money environment of the 1980s. It captures, in miniature, a scene repeated over and over throughout the Sun Belt in the mid-1980s and the Northeast and Mid-Atlantic states today, where a real estate recession looms.

The fuel for Loudoun's boom was the sheer availability of borrowed money -- rather than regard for supply and demand.

Real estate loans flowed freely in Loudoun County and throughout the Washington metropolitan area during the middle and late 1980s. Banks and thrifts were enticed by the giant upfront fees they could earn just for making loans -- and by the chance to get in on Loudoun's growth at the ground floor.

The fragmented nature of the real estate business, with its many players in commercial and residential development, contributed to the overbuilding.

The current oversupply is the sum of many individual real estate development and investment decisions. Those individual decisions seemed sensible at the time to the people making them. But taken together, they added up to excess.

The numbers tell a part of the story. As of Jan. 1, builders were proposing to build another 54,000 homes in Loudoun County, according to Housing Data Reports, an industry information service -- more than 150 percent of the current housing stock.

The supply of office and "flex" space (versatile buildings suited for office, research and development, or storage use) has grown to 21 times its 1980 level, from about 295,000 square feet to 6.5 million square feet, according to Realty Information Group, a McLean market research firm. The biggest bulge occurred last year, when developers added 2.2 million square feet of buildings.

The oversupply is evident at projects like One Steeplechase in Sterling, a five-story building finished in March 1989. Built by Houston developer E. Wayne Starr, One Steeplechase features a fitness room with weight machines and cycles, a waterfall, a gazebo and a man-made pond on 12 remote acres off Route 28. A bronze horse and rider leap a hurdle in the atrium lobby.

The trouble is, a real estate agent is the only person there to appreciate the extras. The building is completely vacant.

SouthTrust Bank of Alabama foreclosed last December and is still trying to lease or sell the building. The asking price is $9 million, less than three-quarters of the county's $12.3 million tax assessment -- and less than it reportedly cost to develop the building.

"It's a beautiful building," said David Levy of Rockville-based Property Tax Specialists Inc., which helps property owners appeal assessments. "It's just too far away from the action. The problem is it's just too far away from everything."

Robert Manekin, whose company developed the office park where engineer Richard Huxta works, cited good news and bad news in Loudoun County.

The good news, he said, is that more than a year after the Manekin Corp.'s buildings were erected, they are approaching full occupancy. The bad news, from the developer's standpoint, is that Manekin offered deep discounts to get businesses to lease offices there, including as much as a year and a half of free rent on a five-year lease.

Those concessions cut the financial return from the office park to about two-thirds of Manekin's original projections.

Loudoun accounts for only a sliver of the metro area's 270 million square feet of commercial development. But even if the economy quickly absorbs its excess development, it is unlikely to justify developers' investments in thousands of acres of Loudoun land, real estate executives said.

According to Realty Information Group, developers have announced plans to create another 60.8 million square feet of office and flex buildings in Loudoun County within a generation, more than all the office space in Boston.

"That's not going to happen," said Realty Information President Andrew C. Florance.

And the Loudoun developers have more than just each other to worry about. Altogether, real estate companies have announced plans that would double the amount of commercial development in the metropolitan area, Realty Information Group reported.

Some experts attribute the Loudoun situation to a "herd" mentality in the real estate and banking businesses, the tendency to follow the crowd.

Others blame it on overconfidence -- each developer's belief that he would distinguish his buildings from the rest and succeed, no matter how crowded the market might get.

Still others cite tunnel vision, a failure of the individual builders and bankers to pay enough attention to all the development plans competing with their own.

Fueling it all were great expectations for Loudoun's future, which developers and Loudoun County officials still espouse. Real estate executives reasoned that the presence of Dulles International Airport and the growing congestion in neighboring Fairfax County would rapidly make Loudoun a major business hub and bedroom community.

The transformation is underway, but it is not happening as fast as many investors bet.

E.M. Risse of SYNERGY/PLANNING, a Fairfax-based land-use consultant, sees the "greater fool theory" at work. According to Risse, the only thing supporting the pumped-up prices people paid for Loudoun property was the belief that some "greater fool" would come along and pay even more.

In a frenzy of speculative buying between 1985 and 1988, the average price paid for undeveloped commercial and industrial land in the county more than quadrupled, according to a county study.

Investors bought and sold land like stocks in a raging bull market, and tax assessments followed. During the past seven years, the assessed value of taxable real estate in Loudoun County has increased more than fivefold, from $2 billion to $10.7 billion.

"There are a lot of people in the Dulles Corridor, in Loudoun County and other parts of Northern Virginia who are desperately in search of the next greater fool," Risse said. "There is no real market, and therefore there is no real value" at the prices many owners paid for their real estate, he added.

Loudoun County Administrator Philip A. Bolen is predicting a 5 percent to 15 percent decline in commercial and industrial property assessments. Some of the county's leading real estate agents and investors have been predicting that property values may plunge more than 15 percent, if they have not already.

Home builders and office developers alike who bought land when prices were high could have trouble competing with those who buy at lower prices, real estate executives said.

Just as commercial developers see Loudoun's promise of plentiful new homes as a drawing card for business, residential developers have counted on commercial development to attract workers and home buyers.

Even if plans to more than double the number of homes in Loudoun are eventually realized, some of their original authors will not be sharing the profits, industry executives predicted.

They will have gone the way of Fort Beauregard Development Corp., which defaulted on a loan to Signet Bank/Maryland and recently lost 70 acres through foreclosure, or Kettler & Scott, which could not support the debt on Cascades, a massive planned community, and ceded ownership of the project to Chevy Chase Savings Bank.

At a time when they were poised for unprecedented business, Loudoun home builders are struggling with plummeting sales. In the first six months of the year, sales of new homes declined by 42 percent to 573, according to Housing Data Reports.

"It's very stressful," said Steven Powell, president of United Development Corp., which developed the Fairway Manor subdivision in Leesburg where Richard Huxta lives.

Powell said he has stopped construction at Fairway Manor, which was generating work for dozens of people a year ago, because "there's really no market there right now." While he waits and hopes for conditions to improve, he has adopted a new austerity at home.

"My doctrine to my family is, if it's not a necessity right now, we're not going to buy it," Powell said.

Amid the disappointments, local officials and business executives see cause for optimism. Two major aviation companies, British Aerospace PLC and Airbus Industrie, and one major defense contractor, E-Systems Inc., recently have announced plans to create facilities in Loudoun. Their buildings will be custom-built; the available buildings do not suit them.

Airbus Industrie will move into Beaumeade Corporate Park, a 684-acre development near the airport on land that was a sod farm only six years ago. Today, the nine buildings at Beaumeade are more than 80 percent vacant, according to Realty Information Group.

Airbus Industrie's decision encourages Blazer Catzen, whose Baltimore-based CAPE Development Corp. completed two buildings at the park this year. Catzen said his company had the right idea when it bought into Loudoun County.

"The problem is," he said, "everybody else had the same idea at the same time, and the banks funded them all, good and bad."

Staff writer Jacqueline L. Salmon contributed to this report.